U.S. AVERAGES

Rising oil ahead of fuel inventory report weighed on stocks and dragged them off their 4-year highs hit Tuesday. As many as 21 named storms and 11 hurricanes are forecast for the 2005 hurricane season, matching a record set in 1933, according to U.S. government forecasters.

The euro surged versus the dollar on speculation that Middle Eastern oil producers were shifting revenue away from dollars.

Treasury prices were higher as the U.S. Treasury Department is expected to announce the return of the 30-year bond Wednesday, according to some reports.

There are no market segments under considerable selling pressure in the early hours of trading, though tech shares are down after the broad rally Tuesday.

The semiconductor sector slightly retreats. The disk drive sector is also down.

The gold sector is a noteworthy advancer in the early dealings, jumping by 1.6%. The HMO and biotech sectors are higher as well, together with the energy segment as oil prices reached record highs.

On the earnings front, shares of Time Warner Inc. (TWX: chart) fell 2.1% to $17.05 after the media giant posted a 2Q loss of $321 million as it set aside $3 billion to cover legal reserves for a settlement.

ECONOMIC NEWS

According to the report from the Institute for Supply Management business activity in the service sector saw continued growth in the month of July, although the pace of growth slowed more than economists had estimated. The report also marked a sharp increase in prices that may result in to some inflation worries.

The ISM’s index of business activity in the service sector fell to 60.5 in July from 62.2 in June. Economists had expected a decline to 61.5.

The drop in the pace of business activity growth comes in spite of continued improvement in new orders, with the new orders index advancing to 61.9 in July vs. 59.5 in June. The backlog of orders index also grew to 53.5 in July versus 52.5 in June.

The pace of employment growth in the service sector slowed, with the employment index falling to 56.2 in July from 57.4 in June.

Prices saw a sharp rise in July, with the prices index climbing to 70.3 vs. 59.8 in June.

Mortgage application volume declined in the most recent week, according to industry report released Wednesday, with a rise in purchase activity not quite overcoming a fall in refinancing.

The Mortgage Bankers Association reported that its market composite index of mortgage loan application volume declined 0.3% for the week ended July 29. The 4-week moving average for the market index, which flattens out week-to-week volatility, slid 3.2% The index of purchase activity advanced by 1.9%, while the index of refinancing activity declined by 3%. The refinance share of total applications dropped to 41.7% versus 42.9% in the previous week.

INTERNATIONAL MARKET NEWS

Asian-Pacific markets closed mixed after higher early trading, following Wall Street gains. The Nikkei advanced 0.4% led by auto makers, mining and steel stocks. As crude-oil prices rose above $62 a barrel, Nippon Oil jumped 4.4% to become the biggest gainer in the index. The other regional markets ended mostly down. Hong Kong’ Hang Seng lost 0.1%, South Korea’s Kospi fell 0.2%, and Singapore’s Straits Times dropped 0.5%. The dollar traded at the lower end of 111-yen range in early Tokyo trading.

European markets traded lower at mid-day after several consecutive gaining sessions, reflecting mixed earnings reports from major companies, although deal news provided some upside. The German DAX 30 lost 0.3%, the French CAC 40 declined 0.4%, and London’s FTSE 100 dropped 0.3%

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices hit a new high on expectations that U.S. data would indicate fall in the crude stocks of the world’s biggest consumer and on supply worries, caused by the forthcoming hurricane season. Light sweet crude for September delivery advanced 58 cents to reach $62.47 a barrel. London Brent traded up 63 cents at $61. 25.