Thursday, January 16, 2003 By JEANNINE AVERSA Associated Press

WASHINGTON - Wholesale prices held steady in December as the sputtering economy made it difficult for some companies to charge more.

The flat reading in the Producer Price Index, which measures prices paid to factories, farmers, and other producers, came after wholesale prices fell by 0.4 percent in November, the Labor Department reported Wednesday. Excluding energy and food prices, which can swing widely, core wholesale prices dipped by 0.3 percent in December for the second straight month, suggesting some good deals are out there.

The Federal Reserve, meanwhile, painted a picture of a lackluster economy in its latest survey of business conditions. It found "subdued growth" in economic activity from mid-November through early January and little change in overall conditions.

The Fed said its regional banks used such words as "sluggish," "soft," and "subdued" to characterize growth.

The Fed said the weakest report came from Dallas, which said activity "remained anemic."

Policymakers will consider those findings when they next meet, Jan. 28-29, to decide the course of interest rates. Economists believe the Fed, which has pushed rates to a 41-year low, will leave them unchanged, preferring to see whether it has done enough to energize the economy.

On Wall Street, stocks fell on mixed earnings news from Intel Corp. The Dow Jones industrial average lost 119.44 points, closing at 8,723.18.

In the Labor Department report, wholesale costs were flat. Falling prices for computers and cars offset higher prices for gasoline and other energy products.

Those declining prices - if passed on to shoppers - benefit consumers, but squeeze some companies' profits.

Businesses whose product prices are dropping may feel more pressure on already strained profit margins. But companies buying those lower-price goods might get a break through reduced costs of doing business.

"With demand uncertain, many businesses have very weak, very uncertain pricing power," said economist Clifford Waldman, president of Waldman Associates. "Businesses, especially manufacturers, are struggling with the up-and-down recovery."

The latest snapshot of wholesale prices showed that inflation is not a danger to the economy, which is struggling to recover from the 2001 recession.

That inflation has remained under control is one of the reasons Federal Reserve Chairman Alan Greenspan and his colleagues have kept short-term interest rates at low levels in an effort to spur economic growth.

The new look on wholesale prices "is the kind of report that would make even Alan Greenspan sleep well at night," said Joel Naroff, president of Naroff Economic Advisors.

For all of 2002, wholesale prices rose a tame 1.2 percent, compared with a 1.6 percent drop in 2001.

Last year's pickup largely reflected rising energy costs. Energy prices rose 11.9 percent in 2002, a turnaround from a 17.1 percent decline in 2001.

In December, energy prices rose 0.9 percent, compared with a 1.8 percent drop in November.

Energy prices have been affected by supply disruptions due to a strike in Venezuela, a major oil exporter to the United States, and fears that a possible war with Iraq could impede the flow of oil.

Gasoline prices in December went up 1.6 percent. Home heating oil prices rose 4.7 percent. Liquefied petroleum gas, such as propane, rose 7 percent, the biggest increase since September. Residential electric power increased 0.6 percent.

Food prices went up 0.4 percent in December, following a 0.3 percent increase.

Those price increases were offset by lower prices elsewhere.

Car prices last month dropped 2 percent and truck prices fell 1.6 percent, the biggest decline since July. Computer prices fell 2 percent and telephone equipment prices went down by 1.3 percent.

Separately, the Commerce Department reported that businesses boosted stockpiles of unsold goods by 0.2 percent in November from the previous month - a possible sign that companies were betting there would be an appetite for their products.

Businesses' sales, meanwhile, rose 0.3 percent in November.

cbs.marketwatch.com By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:34 PM ET Feb. 21, 2003

NEW YORK (CBS.MW) -- A fire at a Staten Island fuel storage facility put U.S. energy supplies clearly in the spotlight Friday, pulling heating oil within pennies of its all-time high and natural gas to the highest price level seen in two years.

The "bottom line is that even without the fire, inventories are falling and tightening at a rapid pace," said Michael Armbruster, an analyst at Altavest.com. A fire "can only exacerbate that," he said.

Distillate inventories fell just about 4 percent in the last week, following three weeks of significant draws, Armbruster noted.

Market sources confirmed that more than 50 percent of the heating oil used in U.S. comes through the Arthur Kill waterway, separating New York's Staten Island and outlying New Jersey communities.

The fire erupted Friday morning, prompting the closing of the waterway while authorities conducted an investigation. New York Mayor Michael Bloomberg characterized it as an accident during a press conference.

"It is a vast storage and production site," said John Person, analyst with Infinity Brokerage Services, noting that the Arthur Kill area is a key artery for shipping fuel along the Eastern Seaboard and the Intracoastal Waterway.

On the New York Mercantile Exchange, heating oil for March delivery rose to an intraday high of $1.12 per gallon, pennies shy of the all-time futures high of $1.147 a gallon seen in April 1981, according to Alaron.com senior analyst Phil Flynn. The contract then fell back to close at $1.1085 a gallon, up by 4.98 cents, or 4.7 percent.

Other fuel contracts moved higher as well, including March natural gas, which rose as high as $6.70 per million British thermal units -- a level not seen since $7.10 reached in February 2001. It closed at $6.606, up 44.4 cents, or 7.2 percent.

Crude for April delivery touched $36 a barrel before easing back to close at $35.58, up 84 cents, while March unleaded gasoline closed at $1.012 a gallon, up 4.62 cents, after climbing as high as $1.017.

"Between the Iraqi situation, Venezuelan unrest, oil-worker union demands in Nigeria and now an explosion at a storage facility, the supply side of the energy equation continues to have nothing but bad luck," said Grady Garrett, chief trading strategist at EnergyTrendAlert.com.

The Port Mobil distribution terminal belongs to ExxonMobil (XOM: news, chart, profile) and reportedly has a capacity of 2 million barrels in 39 tanks, market sources said.

"In this volatile environment, anything that could be construed as having the potential to disrupt supplies will send prices higher," said Thorsten Fischer, an economist at Economy.com.

Fears of terrorism "probably caused some market overreaction," he added. Authorities have said there are no indications of terrorism.

ExxonMobil said the explosion occurred during the offloading of a barge containing 100,000 barrels of unleaded gasoline. At least one person was killed. See full story.

"The refinery explosion is a dramatic setback and one more event that will support the outlook for continued price advances in the energy complex," Person said.

Tight by any definition

The nation's crude inventories remain mired around 270 million barrels -- the minimum level required to keep refineries operating normally.

Early Thursday, the Energy Department said the nation's inventories of crude oil rose by 3.1 million barrels in the week ended Feb. 14, compared with the prior week. The American Petroleum Institute reported a 3.3 million-barrel decline in crude stocks.

But aggregate crude stocks stood at 272.9 million and 268.3 million barrels, according to the Energy Department and API, respectively.

And on a year-over-year basis, crude inventories are down more than 15 percent, the equivalent of 50.4 million barrels, the government report said. The previous week, the Energy Department reported its lowest level for inventories in 27 years -- just under 270 million barrels.

Distillate inventories declined by 3.2 million to total 107 million barrels, while gasoline supplies fell by 1.8 million to 210.7 million barrels, the API said.

The Energy Department reported a 4.6 million-barrel contraction in supplies of distillates, to 103.6 million barrels. And gasoline fell by 1.4 million barrels to 211.2 million barrels in the latest week. See full story.

In spite of supply-constricting developments in Venezuela and elsewhere, the Energy Department appears of the view that there is no shortage of crude oil, said Tim Evans, senior analyst at IFR Pegasus.

But Evans believes the Energy Department fears a further price spike and doesn't want to be blamed for contributing to it. "As they said in their report, the market is in 'a delicate balance' indeed," he told clients Friday.

'Very nervous' over Iraq

Further pinching on the supply situation, the market remains concerned that a U.S.-led war with Iraq is imminent.

"Traders are very nervous as prices are very high and the U.S.-Iraqi prewar diplomatic 'dance' seems to be reaching a crescendo," said EnergyTrendAlert.com's Garrett.

Infinity Brokerage's Person further emphasized the prospect of higher prices ahead by noting that "if supplies in a non-wartime environment are at nearly three-decade lows, what will happen if the U.S. does go into action?"

Cargo and oil shipments form the Middle East would be detained, causing delays of needed supplies and pulling prices even higher, he said.

Late Thursday, U.S. Defense Secretary Donald Rumsfeld told the PBS program "Newshour with Jim Lehrer" that U.S. troops are ready to attack Iraq if and as soon as President Bush gives the order. See Special Report: Countdown to War.

Supportive data for natural gas

In other energy trading, natural-gas futures hit fresh two-year highs on the back of the rally in petroleum futures and a larger-than-expected decline in natural-gas supplies. Renewed expectations for cold weather also provided a supportive backdrop.

Natural gas is certainty feeding off the rally in petroleum futures, said Altavest.com's Armbruster, but natural gas has its own tight supply situation to worry about.

U.S. supplies have fallen by about 1 trillion cubic feet in the last five weeks, he said.

The combination of declining inventories and falling production is pulling prices higher, said Armbruster, adding that there's "very good reason to look for natural gas to go significantly higher in next month or so."

On Thursday, the Energy Department reported a 203 billion cubic fall in inventories as of Feb. 14.

By two key measures, total inventories of 1.168 trillion cubic feet are significantly lower -- 868 billion cubic feet less than the year-ago level and 436 billion cubic feet below the five-year average, the government said.

IFR Pegasus was looking for a decrease of 150 billion to 170 billion cubic feet. A year earlier, stocks contracted by 124 billion cubic feet.

"It looks like there is enough cold in the forecast to also contribute to further market strength here," said IFR Pegasus' Evans.

The National Weather Service calls for below-normal temperatures in western states and the Northeast next week, he said, with above-normal temperatures seen as likely in the Southeast.

Also on Nymex, gold futures prices traded modestly lower Friday with traders focused on watching the U.S. dollar and developments overseas. See Metals Stocks.

In the equities arena, most oil-service shares traded higher. The Philadelphia Oil Service Index ($OSX: news, chart, profile) rose more than 3 percent. See Energy Stocks.

The Reuters/CRB Index, a broad-based measure of the commodity futures market, closed at 248.1, up 0.7 percent on strength in the energy commodities. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

www.vheadline.com Posted: Friday, February 21, 2003 By: Robert Rudnicki

US investors are believed to be growing increasingly concerned about the situation in Venezuela following the arrest of Venezuelan Federation of Chamber of Commerce & Industry (Fedecamaras) president Carlos Fernandez. Reuters quoted MFS Investment portfolio manager Mark Dow as saying "Chavez has won and it appears he is consolidating his hold on power."

Dow went on to question recently imposed foreign exchange controls and the current weak fiscal position, speculating that the government may be setting the stage to print money to cover public sector borrowing requirements, a move which could drastically effect inflation.  He says "it is almost impossible that Chavez' economic policies will work, so the non-oil economy will continue to deteriorate."

www.vheadline.com Posted: Thursday, February 20, 2003 By: Patrick J. O'Donoghue

Reactions to the government-opposition negotiating teams’ non-aggression agreement have been skeptical and mute. Universidad Central de Venezuela (UCV) Political Psychology Unit coordinator, Mireya Lozada says the problem is putting the agreement into concrete actions on different levels of society.

Reflecting growing intuition among analysts that agreements reached at the top are not enough to stem the tide of violence, Lozada says the agreement must be assimilated and carried out on all levels of society.

"Each association, political party and NGO must drop insulting and aggressive language … that means both sides must drop the spin that the other side is responsible for the violence … discourse must favor dialogue and respect and democratic values.”

Lozada insists that print & broadcast media have a special role to play to make the agreement work … “they have to make sure that programs don’t contaminate each other and must avoid sending conflicting signals to viewers and listeners.”

www.washingtonpost.com By John M. Berry Washington Post Staff Writer Thursday, February 20, 2003; 1:23 PM

The nation's trade deficit soared to a record $44.2 billion in December and to $435.2 billion for all of 2002, putting a significant damper on U.S. economic growth last year, the Commerce Department reported today.

The deficit in trade in goods alone was $484 billion, more than a fifth of which was in trade with China. That country sold $103 billion more goods and services to the United States than it bought here.

The worst deterioration in both December and the entire year came on the goods side of the ledger. The deficit in goods trade widened to $484.4 billion from $427.2 billion in 2001 while the perennial surplus in services trade shrank to $49.1 billion from $68.9 billion, the department said.

"In terms of trade, 2002 was a real downer," said Jerry Jasinowski, president of the National Association of Manufacturers. "Manufacturing exports declined $34.2 billion, or 5.7 percent, to $563 billion."

The manufacturing sector of the economy, hard hit by the recession of 2001, has barely begun to recover and has lost jobs for 30 months in a row, Jasinowski said. "The absence of an export recovery is a critical element of this weakness," he said.

Meanwhile, the Labor Department said its index of producer prices for finished goods shot up by 1.6 percent last month, the largest monthly increase in a dozen years. The index measures changes in the prices charged by producers when they first sell a completed item.

The increases in prices were much larger and much more widespread than analysts had expected. Surging crude oil costs did the most damage.

Oil prices have shot up because of fears of world supply disruptions if the United States wages a war against Iraq and because political problems in Venezuela have severely disrupted production in that country, a significant supplier of oil to the United States.

Gasoline prices rose 13.7 percent and home heating oil prices 19.7 percent. Food prices increased 1.6 percent, primarily because of an 18.2 percent jump in fresh vegetable prices. And the prices automakers charged dealers for new cars rose 3.5 percent because the manufacturers cut back on the sales incentives they had been offering. Prices for light trucks, including sport utility vehicles, rose 4.1 percent.

Even with last month's spike in producer prices, the increase in the PPI over the past 12 months was relatively modest. The overall index was up 2.8 percent from January 2002 with most of that due to a 17 percent increase in energy prices. Food prices rose only 0.4 percent over the period and the so-called core portion of the index, which excludes food and energy items, was up only 0.5 percent.