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.

Oil exploration company ONGC declined 1.4% to Rs 1,099.40, after an initial increase caused by surge in global crude oil price. Gas transmission and distribution firm, GAIL India, lost nearly 4%, to Rs 247. Record high oil prices depressed refinery and auto shares. Among refiners, BPCL lost 3.7%, to Rs 316, and HPCL sank nearly 3%, to Rs 214.45.

Among auto stocks, Tata Motors lost nearly 4% to Rs 739, Ashok Leyland was off 3.6% to Rs 34, Maruti Udyog declined 1.7% to Rs 800 and M&M was down 1.6%, to Rs 586. Bajaj Auto shed 2.4%, to Rs 2,640 ahead of its Q1 results which are scheduled for tomorrow. Analysts have forecast between 45% and 53% growth in Bajaj Auto’s net profit (before extra-ordinary and prior period items) to between Rs 302.90 crore - Rs 320.80 crore from Rs 209 crore in Q1 June 2005.

Index large-cap, Reliance Industries rebounded towards the end of the trading session after being weak almost throughout the day. Reliance Industries closed flat at Rs 1,074, off a session-low of Rs 1,051.10 on a huge 17.3 lakh shares traded on BSE. HDFC Bank declined 2% to Rs 731. The private sector bank today posted strong Q1 June 2006 numbers. HDFC Bank has reported a strong 30.3% growth in Q1 June 2006 net profit to Rs 239.30 crore from Rs 183.53 crore.

Engineering & construction large-cap L&T shed 2.7%, to Rs 2,190, cellular services company Bharti Airtel lost 2.7% to Rs 361 and PSU power equipment company Bhel declined nearly 2% to Rs 1,925. Hindalco sank nearly 4% to Rs 175 as the stock turned ex-dividend today (dividend Rs 2.20 per share).

Among the gainers were select second line IT shares, surging on hopes of strong first-quarter numbers. Polaris Software surged 10% to Rs 91.70. The stock advanced on huge volume of 36.9 lakh shares on BSE. Aftek Infosys gained nearly 14% to Rs 56.80. The scrip rose on a heavy volume of 32.2 lakh shares. Sonata Software gained 13% to Rs 27.60, Onward Tech added 20% to Rs 59.75, Orient Info gained 18.5% to Rs 18.20, Geometric Software climbed 9.6% to Rs 99, Datamatics Technologies gained 7% to Rs 49.35, Tulip IT Services was up 5% to Rs 269 and RS Software rose 5% to Rs 61.60.


9:45AM Stocks traded in a lackluster fashion at opening.
U.S. stocks opened the Friday session in a lackluster fashion as weak June retail sales fed speculation the Fed Reserve might stop raising interest rates. Some traders appeared reluctant to continue selling stocks, and others were unwilling to go bargain hunting amid growing concerns about rising tensions in the Middle East and the impact of record oil prices of $78 a barrel. In economic news, retail sales fell unexpectedly in June by 0.1%, vs. the expected 0.4% sales increase. Excluding gasoline sales, June retail sales fell 0.2%.

EMC Corp.(EMC: chart) added to investors’ worries over corporate profits as the software maker said earnings slid 5% last quarter, after warning earlier this week of a possible miss. Housing stocks came under pressure, with D.R. Horton (DHI: chart) falling 9.7% and leading the sector lower after it forecast Q3 and full year earnings below analyst estimates. Transportation stocks continued to move to the downside, as crude continued to set new all-time highs. Airlines were particularly hard hit in the early sell off, with AMR (AMR: chart) and Continental (CAL: chart) standing among the worst performers in the group, with losses of 3.2% and 2.4%, respectively. On the other hand, commodity stocks showed some strength in the early going. The rise in oil prices pushed up energy stocks. The gold sector posted strength as the price of gold extended a recent upward move. In the first hour of trading, the Dow Jones industrial average fell 9.28, or 0.09%. The Standard & Poor''s 500 index fell 0.89, or 0.07%, and the Nasdaq composite index fell 6.75, or 0.08%.


9:00AM Stock futures pointed to a lower opening on weaker retail sales.
U.S. stock futures pointed to a weaker opening Friday after a government report showed retail sales unexpectedly dropped in June. The Commerce Department said retail sales declined by 0.1% last month, compared with expectations of a 0.4% rise. In earnings news, shares of General Electric (GE: chart) moved lower in pre-market trading even though the industrial, financial services and media conglomerate reported Q2 earnings that came in line with analyst estimates. Standard & Poor''s 500 futures were down 0.2 point, but still above fair value. Dow Jones industrial average futures were down 11 points, and Nasdaq 100 futures were down 0.5 point.

General Electric, (GE: chart), industrial conglomerate, reported a 4% rise in Q2 earnings to 47 cents a share, in line with analysts’ estimates. It also reaffirmed its guidance for 2006. Sales at the company rose 9% to $39.9 billion, after organic sales grew 8%. General Electric said the results reflect strong top and bottom-line growth at its commercial finance unit, demand for products and services at its infrastructure division and strong profitability at healthcare, consumer finance and industrial operations.

Regions Financial Corp, (RF: chart), financial holding company, reported Q2 net income advanced to 75 cents a share, from 53 cents a share in the year-ago period, beating analysts expectations for earning of 64 cents a share. Net interest margin grew 4.24%.

Sensient Technologies Corp, (SXT: chart), synthesizer of flavors, fragrances and colors, reported that Q2 income advanced to 40 cents a share, from 34 cents a year ago on revenue growth. The company forecast fiscal 2006 earnings at $1.38 to $1.42 a share.

Popular Inc, (BPOP: chart), financial-services provider, reported that Q2 net income dropped 26% as net fell to 34 cents a share, from 48 cents in the year-earlier period. The return of the company on assets narrowed to 0.8% from 1.16% in the quarter while return on equity shrank to 10.72% from 17.06%. The net interest margin narrowed to 3.23% from 3.35%. The company said it must continue restructuring its mortgage business in the U.S. and increase deposits and new loans in all its markets.


8:00AM Bank of Japan raised interest rates for the first time in six years.
For the first time in six years, Japan''s central bank raised interest rates Friday, ending an era of zero percent interest. The decision boosts the Bank of Japan''s key overnight call rate to 0.25% from 0.069%, giving a clear signal that the world''s second-largest economy has pulled out of a decade-long slump. Raising rates signifies that deflation has been overcome and that the economic recovery is gathering speed. ‘Today''s decision will contribute to ensuring price stability and achieving sustainable growth in the medium and to long term,’ the BOJ said in a statement released after the policy board''s unanimous 9-0 vote to raise rates at the end of a two-day meeting.