Dedham Condominiums

The price of oil soared above $61 a barrel on Wednesday, putting pressure on stocks but rallying U.S. Treasury securities. Traders believe that escalating oil prices could slow economic growth, which might in turn slow the Fed's rate-hike program. The possibility of a downturn spurred buying, sending Treasury prices up and their yields, which move in the opposite direction of prices, down. Mortgage rates, which had begun to tick up earlier in the session, edged back down and remain close to Tuesday's levels.

A better-than-expected report on the service sector, which employs close to 80 percent of the U.S. work force, was largely ignored. The ISM index on non-manufacturing conditions for June rose to 62.2, which was stronger than the forecast of 58.0 and the May reading of 58.5. Any number above 50 indicates expansion in the sector. Data within the report showed an increase in employment, but it also pointed to a rise in prices paid, which could be a sign of future inflation. New orders were unchanged.

Oil Prices Too High for Wall Street

Oil closed at $61.28 a barrel on Wednesday, propelled by fear that the tropical storms heading for the Gulf of Mexico could hinder oil production. New record prices in oil, gasoline and heating oil put pressure on stocks due to concerns of an economic slowdown and weaker corporate profits. Stocks most hurt by higher oil prices felt the brunt of the downturn. The three major indices closed at their lows for the session.

Only two Dow Jones Industrials closed in positive territory - IBM and Hewlett-Packard - and each posted a gain in excess of 1 percent. This was fitting as tech stocks fared better than industrials. The Dow traded down all day, with 28 Dow components closing in negative territory. United Technologies and Home Depot were the only two whose losses topped 2 percent. Fifteen components lost more than 1 percent, with DuPont and Boeing heading that list. Trading in the Nasdaq was choppy, with the index bouncing in and out of positive territory until closing oil prices pushed it negative. The tech bellwethers were split 50-50 between winners and losers, with Cisco Systems closing flat on the session. Those companies with the biggest gains included IBM, which rose 1.4 percent and Sun Microsystems, which added 1.65 percent. Yahoo! suffered the biggest loss with a 1.4-percent decline, while Microsoft and Dell also dropped more than 1 percent.

In spite of tech losses, many semiconductors remained buoyant, with the Philadelphia Semiconductor Index (known as SOX) gaining 4.46 points on the day. Individual gains in chips kept SOX positive. Standouts included Texas Instruments, Altera, Marvell Technology, and Advanced Micro Devices.

At closing: The Dow 30 Industrial Index was down 101.12 points or 0.97 percent at 10,270.68; the Nasdaq Composite index was down 10.10 points or 0.49 percent at 2,068.65, and the benchmark Standard & Poor's 500 Index lost 10.05 points or 0.83 percent to 1,194.94.

The 30-year Treasury bond rose 20/32 in price with the yield slipping to 4.32 percent from 4.36 percent at Tuesday's closing.

The 10-year Treasury note was up 10/32 in price with the yield dipping to 4.07 percent from 4.10 percent at Tuesday's close.

The 5-year Treasury note was up 5/32 in price with the yield down to 3.86 percent versus 3.89 percent at Tuesday's closing

AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was at 5.434 percent from 5.421 percent at Tuesday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.019 percent from 4.975 percent at Tuesday's close.

Coming Up

Thursday's first-time unemployment claims for the week ended July 2 are expected to rise 10,000 to 320,000. Friday's key U.S. employment report for June is seen showing a 195,000 rise in non-farm payrolls and a steady, 5.1-percent unemployment rate. Overnight and into tomorrow, mortgage rates could stay steady to higher following the large rise in yields over the last few days, although trepidation about Friday's jobs report could lock rates close to current levels.

Carolyn Siegel

carolyn@interest.com

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