Oil forces trade deficit to record high
NEW YORK -- Stocks hovered close to unchanged levels Wednesday as strong earnings news from Intel Corp. was muted by a government report that high oil prices and lower exports had pushed the U.S. trade deficit to a record level.
Anxiety about Wall Street's slow start to the year has made some investors wary of making big bets as a number of companies prepare to release quarterly earnings, and a mixed bag of reports and outlooks did little to build confidence. It made for a confusing market to invest in, but most analysts remained upbeat about the prospects for 2005.
"The start of the year has been difficult, but at the end of the day I think the fundamentals of the economy are intact," said Brian Pears, head equity trader at Victory Capital Management in Cleveland. "The earnings season will probably shape up pretty well, so it seems the selling is based more on what happened in November and December than on the future. So for that reason I'm pretty bullish"
In afternoon trading, the Dow Jones industrial average was up 17.00, or 0.16 percent, at 10,573.22, after spending much of the morning in negative range.
The broader gauges were modestly higher. The Standard and Poor's 500 index was up 0.03, essentially unchanged, at 1,183.02. The Nasdaq composite index added 1.64, or 0.08 percent, to 2,081.26.
In Washington, the Commerce Department said America's trade deficit soared to an all-time high of $60.3 billion in November, reflecting record levels for imports of everything from oil and consumer goods to farm products. The 7.7 percent rise from an imbalance of $56 billion in October beat the previous monthly record, and surprised economists; they'd forecast a slight narrowing of the trade gap.
The news prompted weakness in the dollar, which dropped sharply against the euro and other world currencies after the deficit data was released. Treasury Secretary John Snow has said repeatedly that the Bush administration supports a "strong dollar" policy, but some analysts believe the U.S. government is content to see the dollar fall because it makes U.S. exports cheaper.
The unexpected widening in the trade gap also led to a bounce in gold and, initially, oil prices, which were also moving on the government's weekly report on fuel inventories.
The Department of Energy found a 3 million drop in crude supplies, a deeper decline than analysts had expected, but a 1.9 million build in distillate fuels, which include heating oil. Sweet crude for February delivery added 42 cents to $46.10 per barrel.
Chip maker Intel rose 64 cents to $23.18 after beating Wall Street earnings estimates by 2 cents a share and reporting stronger than expected revenues on strong holiday sales of computer and cell phone chips. It also issued an optimistic outlook for the first quarter.