The world & its commodity markets

Here's a story I came across on CNN and thought I'd share with you, and then share my thoughts. The story may be accessed at: http://money.cnn.com/2008/05/07/markets/markets_newyork/index.htm?cnn=yes

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Stocks slide as oil breaks records

Crude prices top $123 a barrel, dragging on equity prices as investors step back after a strong April and start to May.

By Alexandra Twin, CNNMoney.com senior writer

Last Updated: May 7, 2008: 2:14 PM EDT

NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday afternoon after oil prices hit a record above $123 a barrel and Cisco issued a conservative outlook, giving investors a reason to pause after the recent run up.

The Dow Jones industrial average (INDU) lost 0.7% with about 2 hours left in the session. The broader Standard & Poor's 500 (SPX) index eased 0.8% and the Nasdaq composite (COMP) added 0.9%.

Investors managed to look past record-high oil prices on Tuesday, sending stocks higher. But the advance lost steam Wednesday on concerns about how rising commodity prices will hit consumer spending in an already weak economy.

U.S. light crude oil for June delivery rose $1.66 to $123.50 a barrel on the New York Mercantile Exchange, after briefly touching a record $123.75 a barrel earlier. Prices had been volatile after the weekly inventories report showed a surprise rise in both crude and gas supplies.

Oil hit record settlement and trading highs Tuesday after a Goldman Sachs analyst said crude prices could reach $150 to $200 within the next six months to two years.

Morning economic reports showed further weakness in housing and some strength in worker productivity. The productivity report's inflation component eased, but with record oil and gas prices, worries about pricing pressure remain a drag.

The selling Wednesday was also in response to the market's recent run up, with the major gauges having bounced nearly 15% off the March lows, said Matt King, chief investment officer at Bell Investment Advisors.

"I think people are taking a step back from the run we had in April and early May as we hit the top of the trading range," King said.

King said the stock market will probably stick to a trading range over the next few months as investors look for more evidence that the worst is over.

"We got a little break with the first-quarter GDP report, but there are still questions about the economy and whether we are in a recession," he said.

Cisco and Disney lead earnings charge: Cisco Systems (CSCO, Fortune 500) reported quarterly sales and earnings late Tuesday that topped forecasts. However, the network gear maker's current-quarter revenue forecast was more conservative than what some analysts had been predicting.

Dow component Walt Disney (DIS, Fortune 500) reported higher quarterly earnings that topped estimates, thanks partly to results at its theme parks. The late Tuesday news sent the stock higher Wednesday.

ON Semiconductor (ONNN) rallied 20% in unusually active Nasdaq trading, after forecasting second-quarter sales that are beyond analysts' forecasts. The company also reported first-quarter earnings that topped estimates on revenue that missed estimates.

First-quarter earnings outside the financial sector have been mostly positive, with tech and other areas showing some strength. But a plunge in financial sector profits amid the fallout in the credit markets has left overall earnings on track to have fallen more than 16% from a year ago.

Still, signs that the economy has turned a corner, or soon will, have reassured investors, as have indications that the worst of the financial market mess is over.

Wireless merger: In other corporate news, Clearwire (CLWR) and Sprint Nextel (S, Fortune 500) are combining their wireless units to create a new company called Clearwire.

The $14.55 billion deal is backed by Intel (INTC, Fortune 500), Google (GOOG, Fortune 500), Comcast (CMCSA, Fortune 500), Time Warner Cable (TWX, Fortune 500) and Bright House Networks, and will give the companies a stake in the new venture.

Wall Street of late has been hit by a rash of cancelled or delayed deals, including the proposed Microsoft (MSFT, Fortune 500) purchase of Yahoo (YHOO, Fortune 500), and Bank of America (BAC, Fortune 500)'s buy of Countrywide Financial (CFC, Fortune 500).

Economic news: The Pending home sales index, a measure of the number of homes under contract to sell, dipped 1% in March, according to an industry report released Wednesday. The decline was in line with expectations.

Worker productivity rose at a better-than-expected 2.2% annual rate in the first quarter, the government reported Wednesday. Unit labor costs, the report's inflation component, slowed to an annual rate of 2.2% from 2.8% in the fourth quarter of 2007.

Other markets: COMEX gold for June delivery fell $11 to $866.70 an ounce.

The national average price for a gallon of regular unleaded gas rose to $3.618 from $3.610 the previous day, according to AAA.

The dollar rose versus the euro and the yen.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.88% from 3.92%. Bond prices and yields move in opposite directions.

First Published: May 7, 2008: 9:42 AM EDT
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In particular, this one comment struck me the most:
Oil hit record settlement and trading highs Tuesday after a Goldman Sachs analyst said crude prices could reach $150 to $200 within the next six months to two years.
My opinion, with so much speculation in the market, These kind of comments only serve to make a bad situation worse. Perhaps we should go back to the adage that "If you don't have anything nice to say, then don't say anything at all." The reason for my rant on this is the fact that it seems to me that people make too much money on nothing. Speculation is a money-hungry game driven by greedy people. As people speculate the price of oil higher, the poor people of the world suffer more. The poor people in the United States that have no choice but to drive to make sure they survive (Going to work is a necessary thing, and most people are not able to live close enough to their job to walk, and public transportation is nonexistant in a lot of places.). The high reliance on corn-based ethanol is also exacerbating the problem. Corn growers like it because it makes their corn like gold. The problem is, corn ethanol is not an efficient source of energy, and its eating away at the food supply. Brazil makes their ethanol from sugar cane, which is more energy efficient and is not an essential component of the food supply. Perhaps this is where we could be doing some investment for our fuel needs. I also think that making crude oil substitutes from used plastics and leftover meat trimmings and such would be a good thing as well. These are two of the biggest problems that I see with energy policy as we have it now. The fact that we import our oil from people who don't particularly care for us is another problem. Problems with the value of the dollar are other multiplying effects.