MARKET SNAPSHOT: U.S. Stocks Fall As Oil Rises, Financials Woes Return

By Nick Godt

U.S. stocks fell early Monday morning, as rising crude oil prices fueled uncertainty about the economy, while worries about ailing financials were rekindled by several media reports.

The Dow Jones Industrial Average (DJI) fell 43 points, or 0.5%, to 11,605 in early action, with 26 of its 30 components falling. The benchmark index was pulled lower by General Motors Corp. (GM), AIG (AIG), and Hewlett Packard (HPQ).

Shares of Exxon Mobil Corp. (XOM) rose 0.7%.

Crude-oil prices moved higher amid worries that Tropical Storm Fay could reach installations in the Gulf of Mexico. The September-dated light crude contract tacked on 70 cents to $114.46 a barrel, having peaked at $115.35.

The U.S. dollar was broadly steady after strong gains in the last couple of weeks and ahead of the latest data on housing, due later in the session, and inflation data due Tuesday.

Financial shares gave up some of their strong gains from Friday. Lehman Brothers (LEH) lost 4% after The Wall Street Journal said it could lose $1.8 billion during the quarter.

Separately, newsweekly Barron's said it's growing more likely that the U.S. government will recapitalize Fannie Mae (FNM) and Freddie Mac (FRE), wiping out investors.

Both Fannie and Freddie lost over 10%.

CURRENCIES: Dollar Rallies To Multiple-month Highs

By Steve Goldstein

The dollar's rally extended to multiple-month highs on Friday as U.S industrial output grew the most in 10 months and as traders continued to react to data that showed economies of five of the Group of Seven nations contracted.

In earlier action, the dollar rose to an intraday high of 110.65 Japanese yen, the highest level since January. The euro fell to an intraday low of $1.4663, the lowest since February, and the British pound fell to as low as $1.8510, the weakest since July 2006.

The dollar index (DXY), which measures the greenback against a basket of currencies, rose to an intraday high of 77.25, its highest level since December.

"The perception that the fundamental picture has tilted in favor of the U.S. dollar has continued to help drive" the greenback up, said Marc Chandler, a currency strategist at Brown Brothers Harriman.

Friday's U.S. industrial production data showed the output of U.S. factories rose 0.4% in July, the best gain in 10 months, the Federal Reserve reported.

Overall, industrial production at the nation's factories, mines and utilities increased a seasonally adjusted 0.2%, as expected, despite a 1.9% drop in output of utilities.

Separately, manufacturers in New York state said business improved slightly in early August, the New York Federal Reserve Bank reported Friday. The Empire state index rose to 2.8 in August from negative 4.9 in July.

UPDATE: Bond And Mortgage Insurers Extend Rally

By John Spence

BOSTON (Dow Jones) -- Shares of Ambac Financial Group Inc. rose sharply Friday morning after a ratings agency affirmed its view on the bond insurer and removed the ratings from review for a possible further downgrade.

Standard & Poor's Ratings Services late Thursday affirmed its AA financial strength ratings on Ambac (ABK) and MBIA Inc. (MBI). The stocks were up about 18% and 7%, respectively, in early trading Friday.

Bond and mortgage insurers rallied Thursday after the latest high-profile settlement related to the auction-rate securities mess.

Also Thursday, the Securities Industry and Financial Markets Association decided to allow newly originated jumbo loans to be included in the to-be- announced market for mortgage-backed securities. The move could lend support to the ailing mortgage market.

Shares of PMI Group Inc. (PMI) rallied 50% on Thursday as investors cheered the mortgage insurer's deal to sell some overseas assets.

Other mortgage insurers traded higher in early dealings Friday. MBIC Investment Corp. (MTG) gained 5% and Radian Group Inc. (RDN) was up nearly 9%.

Despite the recent rally, bond insurers are still down heavily so far this year on worsening conditions in the housing and credit markets. Ambac shares are off about 92% over the trailing 12 months through Thursday's close.

Oil Jumps and Financials and Earnings Add to Bulls' Lumps

Despite an afternoon attempt at a recovery, stocks finished lower as crude oil and commodities rose solidly. Financials faltered amid continued fears for the sector, and economic concerns crept higher after a dismal earnings report from Deere & Co, to add to the pessimistic mood on the Street. However, tech issues fared relatively well amid upbeat comments from Applied Materials, and a $1 billion increase in its share buy back program from Nvidia. In other equity news, Best Buy announced it will carry Apple's iPhone, Toll Brothers posted a drop in revenues, backlog, and net signed contracts. Elsewhere, Moody's downgraded the debt of General Motors, and CVS Caremark has agreed to acquire Longs Drug Stores for $2.9 billion. In economic news, retail sales showed signs of slowing, import prices jumped, and business inventories remained thin. Treasuries finished lower. see more

UPDATE 1-Thai consumer confidence recovers in July

BANGKOK, Aug 14 (Reuters) - Thai consumer confidence rose in July after falling for three straight months, boosted by the government's economic stimulus measures, cheaper subsidised petrol and robust exports, a survey showed on Thursday.

The University of the Thai Chamber of Commerce (UTCC) said its survey showed these positive factors outweighed political uncertainty caused by protests against Prime Minister Samak Sundaravej and concern over the global credit market crisis.

The recovery in July surprised some analysts, who had expected consumption to remain sluggish due to high inflation.

"It may be premature to say that consumer confidence has returned, but the possibility of oil prices hovering in a lower $100-120 range in the second half and the boost from state stimulus measures should improve sentiment in the months ahead," UTCC poll director Thanavath Phonvichai told reporters.

"One negative factor for the economy is lingering political uncertainty," he said, referring to what might happen now former Prime Minister Thaksin Shinawatra has decided to leave the country without fighting corruption charges against him in court.

The street protests have been aimed partly at Thaksin, seen as the power behind the Samak government.

In a bid to shore up its popularity among urban voters, the government introduced stimulus measures in July for six months, including a cut in consumption tax for petrol, free bus and train rides, and reduced power and water charges.

Adding to the beneficial effects of these measures, world oil prices have fallen sharply in recent weeks.

Finance Minister Surapong Suebwonglee, who has tried to revive consumer confidence as soaring inflation curbed Thais' purchasing power, voiced disapproval of the Bank of Thailand's decision to raise interest rates in July to tackle inflation.

That has led to a rift between the government and central bank over how to tackle inflation, which hit a 10-year high of 9.2 percent in July.