Markets & Finance

Stocks Fall on Dow Chemical News


Dow Chemical's joint-venture deal is called off, while oil stocks rise on Middle East tensions

Stocks finished slightly lower Monday amid tensions in the Middle East and a cancelled joint-venture deal for Dow Chemical (DOW). S&P MarketScope notes there are fears that 2009 will be rocky at the outset and there's uncertainty about what the Obama administration will do about the recession.

On Monday, the 30-stock Dow Jones industrial average ended the session down 31.62 points, or 0.37%, to 8,483.93. The broader S&P 500 index fell 3.38 points, or 0.39%, to 869.42. The tech-heavy Nasdaq composite index lost 19.92 points, or 1.30%, to 1,510.32.

On the NYSE, 19 stocks fell for every 11 that rose, while NASDAQ breadth was 20-7 negative as traders dumped 2008 losers.

Oil stocks and crude oil futures moved up amid reports fighting between Hamas and Israel might disrupt Middle East oil supplies. The dollar index recovered from sharply losses, but ended lower at 80.82. Treasuries, which have surged in recent days, were mixed. Gold futures rose in a flight to safety.

Dow Chemical (DOW) says the Kuwait Supreme Petroleum Council (SPC) reversed its prior approval of the agreement between Dow and Petrochemicals Industries Co. to enter into K-Dow Petrochemicals, a planned 50-50 joint venture company. According to newswire reports, the proposed joint venture would have provided Dow with approximately $9 billion that Dow was to put toward its planned acquisition of Rohm & Haas (ROH). Shares of Dow Chemical fell 19% to 15.32, while Rohm & Hass lost 16% to 53.34.

Ford Motor (F) shares fell 3% to 2.22 after newswire reports that Tracinda Corp. confirmed that it has sold all of its stake in the company.

Office REITs were lower as SL Green Realty (SLG) declares a quarterly dividend of $0.375 per common share, which is less than half of what it paid out the previous quarter.

Among other stocks in the news, Satyam Computer Services (SAY) rescheduled its board meeting to Jan. 10 to allow the board to consider options other than a possible buy-back of its stock. Additional options may include: measures to strengthen SAY's governance structure, including increasing size and altering composition of the board; conducting review of the company's strategic options to enhance shareholder value (has engaged DSP Merrill Lynch to assist in this review); addressing issues arising from possible dilution of promoter's stake in the company.

In the bond market, the 30-year bond was off 21/32 to 138-03/32 for yield of 2.632%, the 10-year note was up 09/32 at 114-21/32 for a yield of 2.104% and the 2-year note was up 07/32 to 100-06/32 for yield of 0.789% in thin yearend trading.

Over in the energy markets, February West Texas Intermediate crude oil futures were up $1.94 to $39.65 a barrel on concerns Israeli air strikes against Hamas in the Gaza strip may disrupt supplies from the Middle East, the world's largest producing region. Prices were also boosted by reports that China, the world second-biggest energy consumer, will supplement its emergency stock piles and that the United Arab Emirates announced compliance with agreed OPEC production cuts.

There were no economic reports today. This week's calendar includes Chicago PMI and S&P Case-Shiller reports tomorrow; initial jobless claims on Wednesday; and ISM Friday.

McCormack is senior producer for BusinessWeek.com's Investing channel .

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