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Chevron's warning sinks key barometers

THE Dow industrials and the S&P 500 fell last Friday, dropping for the fourth straight week, after Chevron Corp warned about its quarterly results and consumer confidence fell to it lowest level since March.

But the technology-heavy Nasdaq eked out a gain in light volume after Goldman Sachs upgraded the United States hardware and software sectors.

The news on Chevron and the US consumer highlighted concerns that an economic recovery and corporate profits in the second quarter may be weak. Oil prices continued to skid as US oil futures fell below US$60 a barrel. The drop heightened concerns that demand remains sluggish and prompted investors to sell some shares of energy companies.

"While there have been some positive developments, the overriding concern is that we're still in the middle of a recession," said Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds in San Francisco.

"We've got deflationary indicators, commodity prices are coming back down, demand hasn't picked up, inventories are being worked off, (and) unemployment continues to pick up."

The S&P 500 rallied as much as nearly 40 percent from a 12-year closing low in early March, but the broad-based index is now off 7.1 percent from a peak on June 12. Some analysts are starting to anticipate a prolonged pullback in stock prices, especially if corporations disappoint investors as the earnings season unfolds.

A low ebb

The Dow Jones industrial average dropped 36.65 points, or 0.45 percent, to 8,146.52. The Standard & Poor's 500 Index fell 3.55 points, or 0.4 percent, to 879.13. But the Nasdaq Composite Index gained 3.48 points, or 0.2 percent, to 1,756.03.

For last week, the Dow slipped 1.6 percent, the S&P 500 fell 1.9 percent, and the Nasdaq lost 2.3 percent.

Weighing on investors, US consumer sentiment soured early this month, slipping to its weakest since March, when confidence in the financial sector and economy were at a low ebb.

Energy shares were the biggest losers in the S&P 500, pressured both by a drop in crude oil prices and after Chevron said that any benefit from higher oil prices would be largely offset by a weaker dollar in the second quarter. Chevron's stock fell 2.7 percent to US$61.40 and was among the Dow's top percentage decliners.

The S&P Energy Index dropped 1.1 percent last week.


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