US stocks fall

Wall Street retrenched today as the trade deficit widened and oil prices surged, while a weak quarterly report from Dell also disheartened the US market.

The Commerce Department reported that the trade deficit, the imbalance between what America sells abroad and what it imports, is running higher than last year’s all-time record. The trade deficit rose to 58.8 billion dollars in June, an increase of 6.1% from the May deficit of 55.4 billion dollars.

More than half the deterioration in June reflected America’s surging foreign oil bill, which hit a record high of 19.9 billion dollars, an increase of almost 10% from May. Analysts say climbing oil prices will send that figure higher in coming months.

Crude oil futures hit new records on reports of US refinery outages. A barrel of light crude closed at 66.86 dollars, up 1.06 dollars, on the New York Mercantile Exchange.

In company news, a rare disappointment from Dell sent its stock sharply lower and sparked selling in other tech stocks. Its second-quarter revenue was nearly 300 million below analysts’ forecast and its third-quarter outlook was also well below projections. And McDonald’s fell after soaring on Thursday amid speculation a real estate company is eyeing its store locations and other property.

The Dow Jones industrial average dropped 85.58, or 0.80%, to 10,600.31 after rising 91.48 on Thursday.

Broader stock indicators also sagged. The Standard & Poor’s 500 index fell 7.42, or 0.60%, to 1,230.39, and the tech-focused Nasdaq composite index dropped 17.65, or 0.8%, to 2,156.90.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.25% from 4.33% late on Thursday. The US dollar was up against the euro. Gold prices were higher.

The market has been watching oil prices obsessively, afraid that higher energy costs could lower consumer spending and increase business expenses. The fear is that higher oil prices, coupled with the Fed’s year-plus streak of interest rate hikes, could plunge the economy into a recession.

“The Fed raising interest rates at the same time oil is going up is like pumping the brakes twice,” said Stephen Wood, portfolio strategist at Russell Investment Group. ”If the Fed is raising rates, they will be successful in slowing down the economy. It will happen; it’s like the law of gravity.”

Wall Street is beginning to see hints those fears may be realised. Almost two-thirds of those surveyed for an AP-AOL poll expect fuel costs will cause them financial hardship in coming months, while in April, only half felt that way.

Gas futures were trading up 4 cents at 1.99 on the New York Mercantile Exchange; the average price of a gallon (3.8 litres of regular petrol was more than 2.40 per gallon at the end of the week, compared with 1.86 a year ago, according to the auto club AAA.

Dell’s report, after the close of regular trading Thursday, sent the stock down 2.94 to 36.64. Its revenues dropped because prices for low-end consumer computers ”really have dipped very, very low, and our teams were just too aggressive in following that down,” CEO Kevin Rollins said on a conference call. Goldman Sachs Group downgraded the stock.

McDonald’s sagged 1.44 to 33.25 after analysts said the chain was unlikely to sell stores and other property to rumoured suitor Vornado Realty Trust. The stock had risen on Wednesday on reports of a possible deal.

Maytag said it would back an offer by Whirlpool to purchase Maytag for around 1.7 billion (-1.4 billion), or 21 a share, according to published reports. Maytag rose 22 cents to 19.01; Whirlpool rose 3.70 to 84.40.

Striking British Airways PLC employees returned to work at London’s Heathrow Airport after a strike left 70,000 travellers stranded. The stock fell 16 cents to 52.67.

Knight Ridder, the second-largest newspaper publisher in the US, rose 3.39 to 65.75 after it said it planned to buy back 10 million shares of its own stock over the next six to nine months, a move designed to boost the value of its remaining shares.

Declining issues led advancers roughly 2 to 1 on the New York Stock Exchange, where volume was 1.47 billion shares, even with Thursday.

The Russell 2000 index of smaller companies fell 6.37, or 0.96%, to 660.

Overseas, Japan’s Nikkei stock average fell 0.01%. In afternoon trading, Britain’s FTSE 100 was down 0.24%, Germany’s DAX index was down 0.34%, and France’s CAC-40 was down 0.72%.