US stocks fell in July, pushing the Standard & Poor's 500 Index (S&P 500) to its biggest monthly decline in a year and a half, amid surging oil prices and disappointing forecasts from companies such as Intel Corp.

"Consumer spending is being diverted to spending on gasoline and that is slowing economic growth," said Janna Sampson, who helps manage US$1.2 billion for OakBrook Investments LLC in Lisle, Illinois. "The profit numbers were good, but so many outlooks were lowered."

The S&P 500 fell 3.4 per cent in July to 1101.72 for the biggest monthly drop since December 2002, when it tumbled 6 per cent. The Nasdaq Composite Index also had its worst month since December 2002, sliding 7.8 per cent to 1887.36 this month. The Dow Jones Industrial Average lost 2.8 per cent to 10,139.71 for its largest monthly slump since January 2003.

Both the S&P 500 and the Nasdaq dipped to 2004 lows a week ago before rebounding.

Since July 23, the S&P 500 gained 1.4 per cent, helped by better-than-expected earnings reports from Verizon Communications Inc and Boeing Co. The advance ended the benchmark's string of six consecutive weeks of losses.

The Dow average added 1.8 per cent and the Nasdaq advanced 2.1 per cent.

Oil prices climbed to records on Wednesday and Friday. Crude for September delivery finished the week at US$43.80 a barrel in New York, the highest since futures began trading in 1983.

Also last Friday, a government report showed that the US economy grew at a slower pace than expected in the second quarter. Gross domestic product, the value of all goods and services produced, expanded at a 3 per cent annual rate, following a revised 4.5 per cent pace in the first quarter.

About 69 per cent of S&P 500 companies reported second-quarter profit that beat analysts' expectations, according to Thomson Financial. With about 399 companies having reported, earnings increased 26 per cent, slower than the first quarter's 28 per cent jump, said Thomson.

Investors are concerned profit growth will decelerate further. Intel, the world's biggest semiconductor maker, said gross margin, or gross profit as a percentage of sales, will be about 60 per cent this year. It had previously predicted 62 per cent.

Intel shares lost 12 per cent to US$24.38 in July, completing their largest monthly decline since December 2002.

The S&P 500 set a 2004 low on last Monday, when it fell to 1084.07. The Nasdaq Composite also recorded its low for the year that day, closing at 1839.02. That also marked the Nasdaq's lowest level in nine months.

Since then, benchmark indexes have bounced back, aided by Verizon and Boeing.

Verizon, the largest provider of phone services in the US, said second-quarter profit beat the average analyst estimate by 4 cents a share as a surge in wireless sales drove the biggest revenue gain since 2001. Its shares rallied 9.1 per cent over the last five trading days to US$38.54.

Boeing added 7.8 per cent to US$50.75 in the week. The world's No 2 commercial aircraft maker raised its 2005 forecasts for earnings and aircraft deliveries as the airline industry rebound. Second-quarter profit was 52 cents a share, excluding a tax gain. On that basis,

(China Daily 08/02/2004 page12)