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Oil pressures stocks into the red
Crude hits a new record, climbing above $44 per barrel intraday. Martha Stewart’s legal woes are still hurting her company. Priceline.com slammed after disappointing outlook.

High oil prices held stocks below water at midday, but investors again resisted the temptation to cut and run.

New York light crude oil rose above $44 per barrel, another record in the 21-year history of the contract, before easing later to about $43.80. Concerns about OPEC’s capacity helped push prices higher, with the cartel president calling prices “crazy.”Check out your options.
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“I think anything people can look at on the supply/demand front they are looking at,” Jacques Rousseau, oil analyst at Friedman Billings Ramsey, told CNBC’s “Morning Call.” “For me, the biggest factor is that we've heard about OPEC raising supply and we've seen the numbers in print, but we haven't seen the physical barrels yet, and I think that's what the market is waiting for.”

Yet the market wasn’t ready to throw in the towel. The Dow edged down 0.18%, the Nasdaq composite fell 0.75% and the S&P 500 index dropped 0.14%. If stocks can stage another late-day rally it would be the first time the Dow and S&P have finished up five days in a row since December, CNBC’s Bob Pisani reported.


Naturally, oil stocks were reaping the reward of the energy price spike. The list of new 52-week highs was littered with energy companies, including BP (BP, news, msgs), ChevronTexaco (CVX, news, msgs) and ConocoPhillips (COP, news, msgs).

No birthday gift for Stewart
On the founder’s 63rd birthday, Martha Stewart Living Omnimedia (MSO, news, msgs) disappointed the Street. Martha Stewart’s legal troubles continued to take their toll on advertising. Martha Stewart Living reported a second-quarter loss of 39 cents per share, 6 cents wider than the Reuters Research consensus estimate, as revenues plunged more than 33% from the year-earlier period. For the third quarter, the company said it expects a loss of 50 cents per share, much wider than the 33 cents per share analyst polled by Reuters Research expected.

The company said the results reflect losses “due to the negative effect of Martha Stewart’s personal legal situation.” But it also said the worst of that situation appears to be behind the company. Stewart was convicted of lying to prosecutors over a stock sale and sentenced to five months in prison, plus probation. She is appealing the verdict. The stock sank 2.6% in afternoon trading.

Another scandal-tainted company is doing a little better. Conglomerate Tyco (TYC, news, msgs) reported a fiscal third-quarter profit of 45 cents per share, excluding a charge, with strength in electronics and engineering, Reuters reported. Analysts had estimated a profit of 41 cents per share. Tyco also guided its fourth-quarter profit in line with expectations. Tyco shares rose about 2.24%.

And online travel company Priceline.com (PCLN, news, msgs) beat the Street on second-quarter profit after the bell yesterday, but guidance was a big concern. Priceline.com expects a third-quarter profit, excluding items, of 25 cents to 30 cents per share, compared with the Reuters Research consensus estimate of 31 cents per share. Higher advertising costs and the company’s move to add retail travel sales to its name-your-own-price model are expected to hit the bottom line. Shares plunged more than 13%.

And local phone company Qwest (Q, news, msgs) sank more than 16% in midday trading after it reported this morning a second-quarter loss of 16 cents per share, excluding charges. The loss was wider than the 13 cents per share shortfall analysts surveyed by Reuters Research had estimated. Revenues fell 4.3% from the same quarter a year ago to $3.4 billion, also shy of estimates, as local phone sales fell.

Has the market adjusted to terror?
Stocks aren’t capitulating in the face of increased terror warnings, which means investors are concentrating on the numbers, according to Hugh Johnson, chief investment officer at First Albany Capital.

“I think really what's happened here is that we've sort of accepted either warnings of terrorism or terrorist activities as being part of our financial and economic lives, and we have learned to live with it,” Johnson told CNBC’s “Wake Up Call.” But while avoiding a terror sell-off is encouraging, the earnings and economic indicators aren’t exactly a shot in the arm.

The consensus is that third-quarter earnings growth will fall to 14% from 22% in the second quarter, but, with a steep rise in oil prices, it could drop down to 10%, Johnson said. By the fourth quarter, it could fall to as low to 5%, he added.

As for the economy, the big question is whether June was a blip, as Federal Reserve Chairman Alan Greenspan suggested, or will weakness persist? The recent Institute of Supply Management survey indicated manufacturing employment and supplier delivery was down in July, indicating “maybe June wasn’t transitory,” Johnson said.

’Crazy’ energy prices as supply and Yukos worries persist
The head of OPEC can’t understand this oil spike.

"The oil price is very high, it's crazy. There is no additional supply," OPEC President Purnomo Yusgiantoro told reporters in Jakarta, according to Reuters. Saudi Arabia plans to boost production to 9.5 million barrels per day but can’t do it immediately, Purnomo said. The boost would put Saudi Arabia just 1 million barrels per day short of full capacity.


Read MSN Money columnist Jon Markman’s story on how Saudi Arabia may not have plenty of reserves.

And Russia is investigating the 2002 accounts of Yukos, which could mean even more back taxes owed by the country’s largest oil company. Yukos has one month to pay nearly $7 billion in back taxes, fueling fears that its sales may eventually be halted.

Personal spending lags in June
Personal spending in June fell 0.7%, compared with a 1% rise in May, the Commerce Department said. Economists expected spending to edge down just 0.1%. And personal income rose 0.2%, smaller than May’s 0.6% rise and cooler than the 0.3% rise economists forecast.

“We knew from the (gross domestic product) number last weak that personal spending was a little weaker than we thought,” Jay Bryson, global economist at Wachovia, told “Squawk Box.” “These numbers from June kind of corroborate that.”

The data is more evidence that the Federal Reserve will follow a plan for moderate increases to interest rates, Bryson said.

“Earlier this year the markets were all concerned the Fed would have to start to get aggressive, start hiking rates 50 basis points at a clip,” he said. “I just don’t see that. Growth is moderating and the inflation numbers aren't all that bad either.”

“We do believe that the Fed is going to continue to raise rates back to a more neutral level, but they certainly aren't in a hurry to get to a more neutral rate,” Bryson added.
http://moneycentral.msn.com/content/CNBCTV/Articles/Dispatches/P91012.asp