4:00PM Weaker than expected retail sales, slowing housing market and rising oil pushed market averages to a triple-digit decline for the third day of this week.

-Nasdaq closed down 16.76 points, Dow down 106.94 and S&P down 6.10.

-Yield on 10-year bonds closed at 5.06% and 30-year bond closed at 5.112%.
-Crude oil surged to $79 but settled at $77 per barrel up 30 cents.
-Gold gained $13.60 per ounce to close at $668.

-Asian Marketsclosed lower across the region. Australia, Thailand, Taiwan, Korea and Philippines closed down more than 2%. Japan closed 1.7% lower on interest rate hike.

-European Markets closed lower on higher oil. Near 2% decline in Germany led the decline of more than 1% in all major markets. Russia closed lower 0.2% and S. Africa lost 1.4%.

-Latin American Marketsclosed lower dragged by international markets. Mexico closed down 2% and Brazil declined 0.5%.

Weaker than expected retail sales in June, higher oil prices and earnings warnings from a home builder affected trading sentiment. Market remained under pressure on the continued violence in Middle-East and lack of restraint on both sides of Arab and Israel conflict. Israel offensive in the region is likely to widen conflict and further destabilize the oil price.

June retail sales declined 0.1% from May but were up 5.9% from a year ago. The weak retail sales missed the consensus view of 0.4% rise as reported in a survey conducted by Dow Jones and CNBC.

Stocks in retail, transportation, and housing and semiconductor sector sold-off. Apparel retailer Chico’s (CHS: chart), J C Penny (JCP: chart), Abercrombie & Fitch (ANF: chart) and American Eagle (AEOS: chart) and Urban Outfitters (URBN: chart) declined the most. In the tech sector EMC (EMC: chart) fell on earnings and Sandisk (SNDK: chart), Marvel (MRVL: chart) and Advanced Micro Devices (AMD: chart) declined on the weakness in the semiconductor sector.

Housing stocks were in decline on the earnings revision from D. R. Horton (DHI: chart). The company reported lower earnings for third quarter of 93 cents vs. $1.17 per share a year ago. The company missed estimate of $1.30 per share. The company also lowered its earnings guidance for the fiscal year 2006 to $3.65 from $5.25 to $5.35 per share guidance. The stock declined 7% at close.

General Electric (GE: chart) reported second quarter earnings of 47 cents vs. 41 cents a year ago on revenue rise of 9% to $39.9 billion. The company benefited from the lower tax rate on a sale of assets. The company CEO also said that the revenue in China, Russia and India gained 18%.

Bank of Japan raised interest rate by 0.25% for the first time since August 2000, after a zero rate policy for five years in a row. Markets across Asia fell on the news. Tokyo closed to a three-week low on the decline of 1.7% to 14,845. South Korea declined 2.3%, Taiwan, Indonesia, Australia lost slightly more than 2% and Thailand lost 1.6% on the news. Japanese exporters fell on the rising oil price and slowing U.S. retail sales. Cannon, Sony, Toyota Motors and Mitsubishi fell by a fraction. Hong Kong market index fell 1.04% led by a decline in Chinese shipping companies China Merchants (5.4% loss) and Cosco Pacific (4% loss). In India market average fell 1.7% on the rising oil prices. Autos, cement and IT stocks led the decliners.

12:30PM European markets closed sharply lower.
European markets closed deep in the red for a second day in a row due to surging oil prices and weakness on Wall Street. Crude oil hovered below the $78 a barrel amid ongoing unrest in the Middle East. LVMH Moet Hennessy, the luxury goods maker, and truck maker Man AG were among the top decliners, each losing 3%. The German DAX 30 closed down 1.9% and 5% lower for the whole week, with warning from SAP contributing to the decline. The French CAC 40 slipped 1.5%, while London FTSE 100 fell 1%.

Oil prices surged to $78 amid escalating violence in the Middle East, the standoff with Iran over its nuclear program. Light crude August delivery rose to $78.40 a barrel. London Brent surged 26 cents to $76.95. The dollar traded higher versus major currencies. The euro traded at $1.2632, down from $1.2692. The dollar bought 116.34 yen, up from 115.33. The British pound stood at $1.8346, down from $1.8442. European gold prices advanced. In London the precious metal traded at $665.80, up from $645.50 per ounce. In Zurich gold traded at $666.55, up from $647.95. Silver closed at $11.59, down from $11.39.


11:30AM Stock markets traded down on surging oil.
Surging oil prices of nearly $78 a barrel, weaker retail sales, and bland earnings at General Electric sent stocks deeply in the red. In economic news, the Department of Labor reported that import prices increased modestly by 0.1%, while export prices notably rose by 0.8%. Petco Animal Supplies jumped $8.43 to $27.88 after it agreed to be taken private for $29 per share, or $1.68 billion. In late morning trading, the Dow tumbled 101.33, or 0.93%.

The housing sector posted significant weakness, dragged by D.R. Horton (DHI: chart), falling 7.9% on forecast Q3 and full year earnings will come below analyst estimates. The continued increase by the price of oil contributed to considerable weakness among airline stocks, sending the Amex Airline Index lower by 2.6%. The defense sector was also weak, with Dow components United Technologies (UTX: chart) and Boeing (BA: chart) posting significant losses of 4.2% and 3.1% respectively. Meanwhile, gold stocks continued to buck the downtrend as the price of the precious metal extended a recent upward move. The Standard & Poor's 500 index dropped 8.36, or 0.67%, and the Nasdaq composite index declined 18.04, or 0.88%. Bonds fluctuated, with the yield on the 10-year Treasury note flat at 5.07% from late Thursday.


Import prices increased modestly, while export prices notably increased.
The Department of Labor released its report on import and export prices in the month of June on Friday, showing that import prices increased modestly while export prices showed a more notable increase. The report showed that import prices rose 0.1 percent in June following an upwardly revised 1.7 percent increase in May. Economists had been expecting prices to increase 0.3 percent compared to the 1.6 percent increase originally reported for the previous month. The modest increase in import prices came as prices of petroleum imports gave back some ground after surging higher in the two previous sessions. Petroleum import prices fell 1.4 percent in June after rising 6.1 percent in May and 11.0 percent in April. Excluding petroleum imports, import prices rose 0.4 percent in June compared to a revised 0.7 percent increase in May. The report also showed that export prices increased by 0.8 percent in June after a revised 0.6 percent increase in May. The increase was partly due to a significant increase in prices of agricultural exports, which rose 2.4 percent in June following a 0.6 percent increase in May. Excluding agricultural exports, export prices rose 0.6 percent in June compared to a revised 0.7 percent increase in May.


10:30AM Indian Sensex sheds nearly 2% due to oil price increase.
The Sensex in India shed 180.28 points, or 1.6%, to close at 10,678.22. The turnover on BSE was $500 million (Rs 2,604) crore compared to Thursday’s Rs 2,523 crore. The market-breadth was weak, on the exchange 1,363 shares declined, 1,001 advanced and 82 shares were unchanged.