Dow dives in June

http://articles.moneycentral.msn.com/Investing/Dispatch/080630markets.aspx

Late selling saps a rally, and the Dow has its worst June since 1930. Oil tops $143 but falls back. Energy and metals stocks rise, but techs and financials are weak. Lehman Bros. shares fall 11%. Chrysler will cut back minivan production.

A rally for stocks fizzled this afternoon as financials weakened, offsetting gains for energy stocks amid record highs for crude oil.
The finish typified June for the stock market: Financial stocks were clobbered, especially Lehman Bros. (LEH, news, msgs), which was off 11% on the day. Energy shares could do no wrong. And it left the stock market still flirting with bear-market-like losses.
The Dow Jones industrials, once up as many as 91 points, finished with a 4-point gain to 11,350. The Standard & Poor's 500 Index was up 2 points to 1,280. And the Nasdaq Composite Index fell 23 points to 2,293.
Eighteen of the 30 Dow stocks had gains on the day, but more than 270 S&P 500 stocks moved lower. The finish suggests slumping investor confidence, especially considering record-high crude oil and the beginning of the third quarter -- typically the year's weakest.
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Verizon Communications (VZ, news, msgs), up 3.3% to $35.40, was the Dow leader, up 3.7%, in sympathy with a gain 5.7% for Sprint Nextel (S, news, msgs), up 6.6% to $9.50. The company said sales of its Samsung Instinct phone, a competitor to Apple's (AAPL, news, msgs) iphone, have been quite strong.
Crude oil hit a new intraday high of $143.67 a barrel but fell back as the day wore on before finishing at $140 -- its second close above $140 in a row.
Shares of General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) fell back as news circulated that Chrysler Group will shut down some production. GM was down 0.4% to $11.50 on the day, as it continues to trade at levels last seen in the 1950s. Ford was down 3.4% to $4.81.
CNBC said the company would curtail production of minivans at a plant in St. Louis; production would continue at a plant in Windsor, Ont.
There was also a report in the Detroit Free-Press suggesting Cerberus, Chrysler's majority owner, was considering selling or breaking up the company. Last week, Chrysler denied it might seek bankruptcy protection.
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Lehman shares diveLehman Bros. shares fell 11% to $19.81, their lowest close since June 2000. Neither a sale of the fiercely independent Lehman nor more embarrassing write-downs are looming at the investment house, sources told The Wall Street Journal late today.
Lehman surprised Wall Street earlier this month with a $2.8-billion quarterly loss and the need to raise $6 billion in fresh capital.
There was additional speculation that the nation's fourth-largest investment bank might be acquired by Britain's Barclays (BCS, news, msgs) at a discount price.
The U.K. bank was said to be interested in buying Lehman at a price lower than it is currently worth. A Lehman spokesman declined comment. A Barclays spokesman could not immediately be reached for comment.
Barclays was off 1.9% to $23.15 in New York.

Crude oil crushes the market It was a quiet end to a lousy June and a crummy second quarter. The Dow and S&P 500 suffered losses for a third consecutive quarter; the last time that happened was the third and fourth quarters of 1977 and the first quarter of 1978.
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The Dow was off 10.2% for the month, its worst June since 1930, and off 7.1% for the quarter, modestly better than its first-quarter loss of 7.6%. Since peaking on Oct. 9, the blue-chip index is down 19.9%; the popular definition of a bear market is a loss of 20%.
The S&P 500 was off 8.6% for the month but only 3.2% for the quarter, a tribute to the power of energy stocks. The energy sector of the S&P 500 moved up nearly 17% in the quarter, nearly offsetting a 19% loss for the financial sector. The S&P 500 is off 18.2% from its all-time high in October.
The Nasdaq was off 9.1% for the month but up 0.6% for the quarter, thanks to relatively strong tech stocks such as Research In Motion (RIMM, news, msgs), up about 5%, Apple, up about 17%, and Google (GOOG, news, msgs), up 19%. From the end of October, the index is off 19.8%.
For the year, the Dow is down 14%, the S&P 500 is down 12.8%, and the Nasdaq is off 13.6%.
All was not gloom. Small- and mid-cap stocks had decent quarters. The Russell 2000 Index ($RUT.X), down 7.8% for the month, was up 0.3% for the quarter. The Standard & Poor's Mid-cap 400 Index ($MID.X) was up 5.1% for the quarter, although down 7.1% for the month.
You can blame the market's poor performance on two factors:
The price of oil. The stock market has become hostage to oil prices. Crude is up more than 10% in June and 38% in the second quarter alone. AAA and the Oil Price Information Service said the national average retail price of gasoline was $4.086 a gallon today, up slightly from Sunday and 38% from a year ago. Crude's rise to more than $140 has gutted truck sales for major auto makers, including Toyota (TM, news, msgs), and caused such huge losses for airlines that their viability is questions. General Motors is the Dow's biggest loser for the month and the quarter, down 35% and 42%, respectively.
The disaster of financial stocks. The agony for this sector is now 18 months old because there is such concern about how badly the collapse of the mortgage market has damaged the balance sheets of financial companies. Bank of America (BAC, news, msgs) fell 29.8% for the month, and Citigroup (C, news, msgs) was off 23.4%. Washington Mutual (WM, news, msgs) was off 45% for the month and 56% for the quarter.
While financial stocks, airlines and automakers were the biggest problem areas for the market, they aren't alone. All 30 Dow stocks were lower for the month; no less than General Electric (GE, news, msgs) fell 13% for the month and nearly 28% for the quarter after an embarassing first-quarter earnings miss.
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Chevron (CVX, news, msgs) was the Dow leader, with a tiny loss for the month and was one of just six Dow stocks with gains for the quarter. Chevron's 16% gain was followed by Wal-Mart Stores (WMT, news, msgs), up 6.7%.
GM was the Dow loser for the month (down 32.8%) and the quarter (down 39.6%). GM is the second-worst Dow performer on the year, down 54%, just ahead of American International Group (AIG, news, msgs), down 55%.
Can things get better any time soon? The market is in desperate need of a catalyst. One might come on July 11 when GE reports second-quarter earnings. Analysts now estimate the company will earn 53 cents a share, unchanged from a year ago. If GE beats the estimate, look for a rally.
It will take that kind of a surprise. A look at the charts for the Dow, S&P 500 and Nasdaq suggest a bottom isn't reached. Technical analyst Louise Yamada predicted last week the Dow's bottom would be about 10,000, down 12% from current levels and 30% from last October's highs.
But the bottom is likely more dependent on the dollar and on the price oil.
"Record-high crude prices are a larger danger to the economy than any other factors out there," Windham Financial's Paul Mendelsohn told MarketWatch.