Solution for Risk of Defaulting Mortgage
Global Market
U.S. Market
Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting.
Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments, indicating that he sees housing as a serious threat to the economy that can't be addressed by fiscal or monetary policy alone. The Fed's Feb. 27 report to Congress called for lenders to ``pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments.
The Fed chief highlighted the threat posed by home values falling below mortgage balances. Bernanke said the ``recent surge'' in delinquencies has been ``closely linked'' to the slide of home equity.
Mortgage service ``should have a clear basis for concluding'' that borrowers are unable to make their payments, ``rather than simply being unwilling to do so'' before reducing loan principal, the American Securitization Forum said.
The forum, whose members include Goldman Sachs Group Inc. and Citigroup Inc., lobbies for investors, traders, underwriters, accounting firms, ratings companies and other institutions involved in the creation and sale of mortgage- backed securities. The group commented in a statement today.
The Mortgage Bankers Association also stopped short of endorsing Bernanke's call.
The American Financial Services Association, a 350-member trade group for the U.S. consumer-credit industry, is supportive of Bernanke's idea, as long as it's voluntary, said spokeswoman Lynne Strang.
Bernanke warned today that the housing crisis may deepen. Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point.
In the past, homeowners could refinance, though that option is now ``largely'' gone because sales of bonds backed by subprime mortgages.
Bernanke didn't comment on the outlook for interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel's next meeting on March 18, based on futures prices.
The Fed chairman countered that by reducing the amount of the loan, this ``may increase the expected payoff by reducing the risk of default and foreclosure.''
Bernanke also urged investors in mortgage bonds to accept ``short payoffs'' of loans by allowing borrowers to refinance at a lower principal.
For investors, a reduction in principal that's ``sufficient to make borrowers eligible for a new loan would remove the downside risk'' of further writedowns or defaults. Investors may be able to share in future gains in home prices under some plans.
Yesterday, the Fed and other regulators sent letters to institutions they supervise, encouraging the banks to report on their efforts to modify mortgages at risk of default.
China Market
China is naming a new generation of economic leaders just as its breakneck growth is slowing.
China may have to reach deeper into an economic toolkit that mostly has been used to cool expansion. China has already paused after raising interest rates six times last year.
They will need to tame inflation without triggering a sudden slowdown. Their task is complicated by the prospect of weaker global demand this year for exports, a main driver of the world's fourth-biggest economy.
The yuan has gained almost 3 percent this year versus the dollar after climbing 7 percent last year. Gains by the currency help curb inflation by cutting import prices and making China's exports more expensive, helping to staunch the inflows of trade cash that threaten to stoke price increases.
Economists are split on whether policy makers will raise interest rates in 2008, with forecasts ranging from no increases to four. Alternative tools include boosting bank reserve requirements, already at a record high.
China concern is they can’t escape from the effect of weakening demand from Japan, the U.S. and Europe. Investors expect government warnings about economic overheating to fade by the middle of the year.
Currencies
The yen approached a three-year high against the dollar as speculation that banks will have to write off more mortgage-related debt led investors to pare carry-trade bets funded with loans in Japan.
Japan's currency reached its strongest level of the day yesterday after Federal Reserve Chairman Ben S. Bernanke urged banks to forgive more mortgage loans. The currency then retreated as U.S. stocks trimmed losses after CNBC reported that a deal with New York to bail out bond insurer Ambac Financial Group Inc. is proceeding. The dollar traded close to a record low versus the euro as traders bet the Fed will reduce rates by 0.75 percentage point to 2.25 percent this month.
The yen traded at 103.36 per dollar, after reached 102.66 yen in yesterday, close to the 102.62 yen level. The dollar traded at $1.5214 per euro when it touched $1.5275.
U.S. banks face ``challenging market conditions'' that will likely hurt earnings and consumer lending. More than 45 of the world's biggest banks and securities firms have taken about $181 billion in asset writedowns and credit losses, including reserves set aside for bad loans.
The Canadian dollar fell to 99.38 Canadian cents per U.S. dollar after the central bank cut Canada's benchmark rate to 3.5 percent and said further ``stimulus'' will likely be required.
Japan's currency also climbed to 95.88 per Australian dollar and to 82.79 per New Zealand dollar as widening credit-market losses prompted investors to reduce so-called carry trades
Japan's benchmark rate of 0.5 percent, the lowest among industrialized nations, compares with 8.25 percent in New Zealand and 4 percent in the euro region. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the difference between the two. The risk is that currency moves erase those profits.
While the Fed has cut borrowing costs five times to 3 percent since September, the ECB has kept its key rate at a more than six-year high of 4 percent to curb inflation even as economic growth slows.
Stock Market
U.S. Stock Market
U.S. stocks fell, led by financial and commodity shares, after Federal Reserve Chairman Ben S. Bernanke urged banks to forgive more late loans and oil, gold and copper prices dropped from records.
Shares pared declines in the last hour of trading after CNBC said a deal to bail out bond insurer Ambac Financial Group Inc. is progressing. Citigroup Inc. tumbled to a nine-year low and helped drag financial shares down for a fourth day after analysts slashed earnings estimates. ConocoPhillips and Freeport-McMoRan Copper & Gold Inc. led a retreat in energy and mining shares, the best-performing industries of the past year.
The Standard & Poor's 500 Index slid 4.59 to 1,326.75 after earlier falling 1.8 percent. The Dow Jones Industrial Average lost 45.1 to 12,213.8, paring a decline of 226 points. The Nasdaq Composite Index added 1.68 to 2,260.28. Five stocks dropped for every three that rose on the New York Stock Exchange.
The S&P 500 briefly dropped below its lowest closing level in 18 months after Bernanke warned in a speech in Florida that the housing slump may deepen. The benchmark for U.S. equities recovered most of its loss following the Ambac rescue report and after Cisco Systems Inc. said it plans to pursue more takeovers. European shares fell for a fifth day and Asia's benchmark index slid for a fourth, its longest losing streak of the year.
The S&P 500 has retreated 9.6 percent this year on growing concern that the worst slump in profits since 2001 will continue after the collapse of the U.S. subprime mortgage market sent banks' credit losses to $181 billion worldwide.
Citigroup fell 99 cents to $22.10. Merrill Lynch & Co.'s analyst expects $18 billion of credit writedowns related to the company's holdings of subprime mortgages, collateralized debt obligations, leveraged loans, consumer debt, real-estate loans and other investments. The analyst slashed his first-quarter estimate for Citigroup to a loss of $1.66 a share from a profit of 55 cents a share and his 2008 profit forecast to 24 cents a share from $2.74. Goldman Sachs Group Inc. said today it cut its first- quarter estimate for Citigroup to a loss of $1 a share from a projection of a 15-cent profit due to a ``miscalculation in our model.''
Goldman slipped $1.48 to $163.60. Bear Stearns Cos. lost 15 cents to $77.17. Lehman Brothers Holdings Inc. retreated 26 cents to $48.35. Morgan Stanley declined 23 cents to $41.35.
The securities firms had their first-quarter earnings estimates cut on expectations the value of mortgage assets will continue to fall.
Bank of America Corp. dropped 40 cents to $38.78. Wachovia declined 93 cents to $29.48. Merrill also cut profit estimates for the two banks, the second and fourth largest in the U.S.
Citigroup and other financial companies may need additional capital as credit losses increase. Global banks and securities firms have already raised about $105 billion of capital amid losses on subprime-related securities.
Earnings at financial companies in the S&P 500 may drop more than 20 percent in both the first and second quarters. Record losses at Citigroup, Merrill Lynch & Co. and other banks and brokerages helped spur a 22.7 percent drop in average earnings for S&P 500 members in the fourth quarter.
Ambac shares jumped 78 cents, or 7.9 percent, to $10.72 for the second-biggest gain in the S&P 500. The stock had retreated as much as 9 percent earlier.
Thirty-four of 36 energy companies in the S&P 500 fell as oil slumped 2.9 percent and prices for gasoline and heating oil declined. O.P.E.C. said the group will make ``no change'' to production targets when it meets in Vienna tomorrow. The S&P 500 Energy Index lost 1.5 percent, paring its gain over the past year to 33 percent.
Mining and agricultural companies declined after prices for copper, gold and corn fell from all-time highs.
Freeport-McMoRan tumbled $4.52 to $98.93. The recent gains in copper prices pose a risk to demand from China.
Newmont Mining Corp. dropped $2.18 to $50.20 after gold prices fell the most in a month as the decline in oil reduced the appeal of the precious metal as a hedge against inflation.
Monsanto Co., the world's biggest seed producer, dropped $6.91 to $111.72. Corn tumbled the most in almost six weeks on speculation that overseas demand and U.S. animal-feed consumption will slow after grain prices reached a record yesterday. The drop today in oil and gasoline prices may also reduce demand for corn-based ethanol as a fuel substitute.
Intel Corp. lost 1 cent to $20 after earlier falling as much as 57 cents. The company said gross margin will be 54 percent, down from the 56 percent it predicted in January. Intel cited lower-than-expected prices of chips that store data in cameras and music players for the reduced forecast.
Intel's prediction sparked early declines in computer- related shares that sent the S&P 500 Information Technology Index down as much as 1.6 percent.
Barr Pharmaceuticals Inc. rallied $3.80, or 8.3 percent, to $49.47. A U.S. judge invalidated a patent on Bayer AG's Yasmin contraceptive. The ruling means Barr may be able to sell a generic version before Bayer's patent expires in 2020.
Fed Vice Chairman Donald Kohn said U.S. banks face ``challenging market conditions'' that will likely hurt earnings and consumer lending, requiring closer scrutiny from regulators.
Fed Bank of Dallas President Richard W. Fisher said U.S. growth is likely to remain ``subpar'' through the end of June and it isn't certain such a slowdown will curb inflation.
Traders speculate that the Fed will lower its rate by 0.75 percentage point on their policy meeting. The rest of the bets are for a 0.5 point reduction.
Commodities
General
Commodities plunged the most in almost six weeks, as oil, gold and corn fell from records on renewed concern that a slowing U.S. economy will curb demand for raw materials.
The Commodity Index of 26 futures contracts fell 29.4346, to 1,507.877. The decline was halting a rally that sent the index up 20 percent this year and to a record high on Feb. 29.
Demand for everything from gasoline to copper to food may slow as inflation accelerates, loan defaults rise and the U.S. housing market deteriorates. Further declines in house prices are likely.
Bernanke, in a speech to bankers in Orlando, Florida, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting. U.S. growth has been stifled, slowing to 0.6 percent in the fourth-quarter, as the subprime mortgage fallout triggered about $181 billion in writedowns and credit losses at the world's largest financial firms.
Commodities have surged this year, beating gains in stocks and bonds, as a slumping dollar and lower interest rates sparked demand for a hedge against inflation. U.S. consumer prices rose 4.1 percent. The Fed has cut interest rates five times since September to avoid a recession, and speculators say more reductions are likely.
Oil, gasoline and heating oil fell from records on signs that the Organization of Petroleum Exporting Countries will leave production targets unchanged when ministers meet tomorrow.
Corn fell for the first time in four sessions on speculation that overseas demand and U.S. animal-feed consumption will slow. Earlier, the grain dropped as much as 20 cents, the exchange's limit.
Still, commodity prices may continue to climb this year because demand is growing in China and India, traders said.
Oil
Crude oil fell more than $2 a barrel on signs that the Organization of Petroleum Exporting Countries will leave production targets unchanged at a time of year when demand declines.
The group will make ``no change'' to quotas when it meets in Vienna tomorrow after oil surged to a record yesterday. OPEC is concerned inventories will climb and prices will drop in the second quarter. A U.S. report tomorrow may show that oil and gasoline supplies rose.
Crude oil for April delivery fell $2.93 to settle at $99.52 a barrel. Futures surged to $103.95 a barrel yesterday.
U.S. crude-oil inventories rose for the past seven weeks, and gasoline stockpiles reached their highest in 14 years, according to an Energy Department report on Feb. 27.
Crude-oil supplies probably advanced 2.4 million barrels in the week ended Feb. 29. The Energy Department is scheduled to release its weekly report on inventories tomorrow at 10:30 a.m. in Washington.
Gasoline for April delivery dropped 14.29 cents, to $2.5291 a gallon in New York. Futures touched $2.7325 yesterday.
OPEC, the supplier of more than 40 percent of the world's oil, will hold a full gathering of all 13 member nations tomorrow. The group will probably retain its output target for 12 of its members at 29.67 million barrels a day.
The Iranian, Venezuelan and Kuwaiti oil ministers told reporters today that they expect OPEC to hold production quotas steady. In recent weeks, Iran and Venezuela had been pushing for a production cutback.
Investors have pushed prices higher in the past six years as they put money into energy because returns outpaced those of other markets.
On Oct. 15, prices passed the previous record reached in 1981 when Iran cut oil exports. The cost of imported oil used by U.S. refiners averaged $39 a barrel in February 1981, according to the Energy Department, or $92.50 in today's dollars.
Brent crude for April settlement fell $2.96, to close at $97.52 a barrel. Futures reached $102.29 a barrel yesterday.
Gold
Gold fell as lower energy prices eroded the metal's appeal as an inflation hedge. The metal for April delivery dropped 1.8 percent to $966.30 an ounce, after reaching a record $992 yesterday.
U.S. Market
Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting.
Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments, indicating that he sees housing as a serious threat to the economy that can't be addressed by fiscal or monetary policy alone. The Fed's Feb. 27 report to Congress called for lenders to ``pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments.
The Fed chief highlighted the threat posed by home values falling below mortgage balances. Bernanke said the ``recent surge'' in delinquencies has been ``closely linked'' to the slide of home equity.
Mortgage service ``should have a clear basis for concluding'' that borrowers are unable to make their payments, ``rather than simply being unwilling to do so'' before reducing loan principal, the American Securitization Forum said.
The forum, whose members include Goldman Sachs Group Inc. and Citigroup Inc., lobbies for investors, traders, underwriters, accounting firms, ratings companies and other institutions involved in the creation and sale of mortgage- backed securities. The group commented in a statement today.
The Mortgage Bankers Association also stopped short of endorsing Bernanke's call.
The American Financial Services Association, a 350-member trade group for the U.S. consumer-credit industry, is supportive of Bernanke's idea, as long as it's voluntary, said spokeswoman Lynne Strang.
Bernanke warned today that the housing crisis may deepen. Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point.
In the past, homeowners could refinance, though that option is now ``largely'' gone because sales of bonds backed by subprime mortgages.
Bernanke didn't comment on the outlook for interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel's next meeting on March 18, based on futures prices.
The Fed chairman countered that by reducing the amount of the loan, this ``may increase the expected payoff by reducing the risk of default and foreclosure.''
Bernanke also urged investors in mortgage bonds to accept ``short payoffs'' of loans by allowing borrowers to refinance at a lower principal.
For investors, a reduction in principal that's ``sufficient to make borrowers eligible for a new loan would remove the downside risk'' of further writedowns or defaults. Investors may be able to share in future gains in home prices under some plans.
Yesterday, the Fed and other regulators sent letters to institutions they supervise, encouraging the banks to report on their efforts to modify mortgages at risk of default.
China Market
China is naming a new generation of economic leaders just as its breakneck growth is slowing.
China may have to reach deeper into an economic toolkit that mostly has been used to cool expansion. China has already paused after raising interest rates six times last year.
They will need to tame inflation without triggering a sudden slowdown. Their task is complicated by the prospect of weaker global demand this year for exports, a main driver of the world's fourth-biggest economy.
The yuan has gained almost 3 percent this year versus the dollar after climbing 7 percent last year. Gains by the currency help curb inflation by cutting import prices and making China's exports more expensive, helping to staunch the inflows of trade cash that threaten to stoke price increases.
Economists are split on whether policy makers will raise interest rates in 2008, with forecasts ranging from no increases to four. Alternative tools include boosting bank reserve requirements, already at a record high.
China concern is they can’t escape from the effect of weakening demand from Japan, the U.S. and Europe. Investors expect government warnings about economic overheating to fade by the middle of the year.
Currencies
The yen approached a three-year high against the dollar as speculation that banks will have to write off more mortgage-related debt led investors to pare carry-trade bets funded with loans in Japan.
Japan's currency reached its strongest level of the day yesterday after Federal Reserve Chairman Ben S. Bernanke urged banks to forgive more mortgage loans. The currency then retreated as U.S. stocks trimmed losses after CNBC reported that a deal with New York to bail out bond insurer Ambac Financial Group Inc. is proceeding. The dollar traded close to a record low versus the euro as traders bet the Fed will reduce rates by 0.75 percentage point to 2.25 percent this month.
The yen traded at 103.36 per dollar, after reached 102.66 yen in yesterday, close to the 102.62 yen level. The dollar traded at $1.5214 per euro when it touched $1.5275.
U.S. banks face ``challenging market conditions'' that will likely hurt earnings and consumer lending. More than 45 of the world's biggest banks and securities firms have taken about $181 billion in asset writedowns and credit losses, including reserves set aside for bad loans.
The Canadian dollar fell to 99.38 Canadian cents per U.S. dollar after the central bank cut Canada's benchmark rate to 3.5 percent and said further ``stimulus'' will likely be required.
Japan's currency also climbed to 95.88 per Australian dollar and to 82.79 per New Zealand dollar as widening credit-market losses prompted investors to reduce so-called carry trades
Japan's benchmark rate of 0.5 percent, the lowest among industrialized nations, compares with 8.25 percent in New Zealand and 4 percent in the euro region. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the difference between the two. The risk is that currency moves erase those profits.
While the Fed has cut borrowing costs five times to 3 percent since September, the ECB has kept its key rate at a more than six-year high of 4 percent to curb inflation even as economic growth slows.
Stock Market
U.S. Stock Market
U.S. stocks fell, led by financial and commodity shares, after Federal Reserve Chairman Ben S. Bernanke urged banks to forgive more late loans and oil, gold and copper prices dropped from records.
Shares pared declines in the last hour of trading after CNBC said a deal to bail out bond insurer Ambac Financial Group Inc. is progressing. Citigroup Inc. tumbled to a nine-year low and helped drag financial shares down for a fourth day after analysts slashed earnings estimates. ConocoPhillips and Freeport-McMoRan Copper & Gold Inc. led a retreat in energy and mining shares, the best-performing industries of the past year.
The Standard & Poor's 500 Index slid 4.59 to 1,326.75 after earlier falling 1.8 percent. The Dow Jones Industrial Average lost 45.1 to 12,213.8, paring a decline of 226 points. The Nasdaq Composite Index added 1.68 to 2,260.28. Five stocks dropped for every three that rose on the New York Stock Exchange.
The S&P 500 briefly dropped below its lowest closing level in 18 months after Bernanke warned in a speech in Florida that the housing slump may deepen. The benchmark for U.S. equities recovered most of its loss following the Ambac rescue report and after Cisco Systems Inc. said it plans to pursue more takeovers. European shares fell for a fifth day and Asia's benchmark index slid for a fourth, its longest losing streak of the year.
The S&P 500 has retreated 9.6 percent this year on growing concern that the worst slump in profits since 2001 will continue after the collapse of the U.S. subprime mortgage market sent banks' credit losses to $181 billion worldwide.
Citigroup fell 99 cents to $22.10. Merrill Lynch & Co.'s analyst expects $18 billion of credit writedowns related to the company's holdings of subprime mortgages, collateralized debt obligations, leveraged loans, consumer debt, real-estate loans and other investments. The analyst slashed his first-quarter estimate for Citigroup to a loss of $1.66 a share from a profit of 55 cents a share and his 2008 profit forecast to 24 cents a share from $2.74. Goldman Sachs Group Inc. said today it cut its first- quarter estimate for Citigroup to a loss of $1 a share from a projection of a 15-cent profit due to a ``miscalculation in our model.''
Goldman slipped $1.48 to $163.60. Bear Stearns Cos. lost 15 cents to $77.17. Lehman Brothers Holdings Inc. retreated 26 cents to $48.35. Morgan Stanley declined 23 cents to $41.35.
The securities firms had their first-quarter earnings estimates cut on expectations the value of mortgage assets will continue to fall.
Bank of America Corp. dropped 40 cents to $38.78. Wachovia declined 93 cents to $29.48. Merrill also cut profit estimates for the two banks, the second and fourth largest in the U.S.
Citigroup and other financial companies may need additional capital as credit losses increase. Global banks and securities firms have already raised about $105 billion of capital amid losses on subprime-related securities.
Earnings at financial companies in the S&P 500 may drop more than 20 percent in both the first and second quarters. Record losses at Citigroup, Merrill Lynch & Co. and other banks and brokerages helped spur a 22.7 percent drop in average earnings for S&P 500 members in the fourth quarter.
Ambac shares jumped 78 cents, or 7.9 percent, to $10.72 for the second-biggest gain in the S&P 500. The stock had retreated as much as 9 percent earlier.
Thirty-four of 36 energy companies in the S&P 500 fell as oil slumped 2.9 percent and prices for gasoline and heating oil declined. O.P.E.C. said the group will make ``no change'' to production targets when it meets in Vienna tomorrow. The S&P 500 Energy Index lost 1.5 percent, paring its gain over the past year to 33 percent.
Mining and agricultural companies declined after prices for copper, gold and corn fell from all-time highs.
Freeport-McMoRan tumbled $4.52 to $98.93. The recent gains in copper prices pose a risk to demand from China.
Newmont Mining Corp. dropped $2.18 to $50.20 after gold prices fell the most in a month as the decline in oil reduced the appeal of the precious metal as a hedge against inflation.
Monsanto Co., the world's biggest seed producer, dropped $6.91 to $111.72. Corn tumbled the most in almost six weeks on speculation that overseas demand and U.S. animal-feed consumption will slow after grain prices reached a record yesterday. The drop today in oil and gasoline prices may also reduce demand for corn-based ethanol as a fuel substitute.
Intel Corp. lost 1 cent to $20 after earlier falling as much as 57 cents. The company said gross margin will be 54 percent, down from the 56 percent it predicted in January. Intel cited lower-than-expected prices of chips that store data in cameras and music players for the reduced forecast.
Intel's prediction sparked early declines in computer- related shares that sent the S&P 500 Information Technology Index down as much as 1.6 percent.
Barr Pharmaceuticals Inc. rallied $3.80, or 8.3 percent, to $49.47. A U.S. judge invalidated a patent on Bayer AG's Yasmin contraceptive. The ruling means Barr may be able to sell a generic version before Bayer's patent expires in 2020.
Fed Vice Chairman Donald Kohn said U.S. banks face ``challenging market conditions'' that will likely hurt earnings and consumer lending, requiring closer scrutiny from regulators.
Fed Bank of Dallas President Richard W. Fisher said U.S. growth is likely to remain ``subpar'' through the end of June and it isn't certain such a slowdown will curb inflation.
Traders speculate that the Fed will lower its rate by 0.75 percentage point on their policy meeting. The rest of the bets are for a 0.5 point reduction.
Commodities
General
Commodities plunged the most in almost six weeks, as oil, gold and corn fell from records on renewed concern that a slowing U.S. economy will curb demand for raw materials.
The Commodity Index of 26 futures contracts fell 29.4346, to 1,507.877. The decline was halting a rally that sent the index up 20 percent this year and to a record high on Feb. 29.
Demand for everything from gasoline to copper to food may slow as inflation accelerates, loan defaults rise and the U.S. housing market deteriorates. Further declines in house prices are likely.
Bernanke, in a speech to bankers in Orlando, Florida, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting. U.S. growth has been stifled, slowing to 0.6 percent in the fourth-quarter, as the subprime mortgage fallout triggered about $181 billion in writedowns and credit losses at the world's largest financial firms.
Commodities have surged this year, beating gains in stocks and bonds, as a slumping dollar and lower interest rates sparked demand for a hedge against inflation. U.S. consumer prices rose 4.1 percent. The Fed has cut interest rates five times since September to avoid a recession, and speculators say more reductions are likely.
Oil, gasoline and heating oil fell from records on signs that the Organization of Petroleum Exporting Countries will leave production targets unchanged when ministers meet tomorrow.
Corn fell for the first time in four sessions on speculation that overseas demand and U.S. animal-feed consumption will slow. Earlier, the grain dropped as much as 20 cents, the exchange's limit.
Still, commodity prices may continue to climb this year because demand is growing in China and India, traders said.
Oil
Crude oil fell more than $2 a barrel on signs that the Organization of Petroleum Exporting Countries will leave production targets unchanged at a time of year when demand declines.
The group will make ``no change'' to quotas when it meets in Vienna tomorrow after oil surged to a record yesterday. OPEC is concerned inventories will climb and prices will drop in the second quarter. A U.S. report tomorrow may show that oil and gasoline supplies rose.
Crude oil for April delivery fell $2.93 to settle at $99.52 a barrel. Futures surged to $103.95 a barrel yesterday.
U.S. crude-oil inventories rose for the past seven weeks, and gasoline stockpiles reached their highest in 14 years, according to an Energy Department report on Feb. 27.
Crude-oil supplies probably advanced 2.4 million barrels in the week ended Feb. 29. The Energy Department is scheduled to release its weekly report on inventories tomorrow at 10:30 a.m. in Washington.
Gasoline for April delivery dropped 14.29 cents, to $2.5291 a gallon in New York. Futures touched $2.7325 yesterday.
OPEC, the supplier of more than 40 percent of the world's oil, will hold a full gathering of all 13 member nations tomorrow. The group will probably retain its output target for 12 of its members at 29.67 million barrels a day.
The Iranian, Venezuelan and Kuwaiti oil ministers told reporters today that they expect OPEC to hold production quotas steady. In recent weeks, Iran and Venezuela had been pushing for a production cutback.
Investors have pushed prices higher in the past six years as they put money into energy because returns outpaced those of other markets.
On Oct. 15, prices passed the previous record reached in 1981 when Iran cut oil exports. The cost of imported oil used by U.S. refiners averaged $39 a barrel in February 1981, according to the Energy Department, or $92.50 in today's dollars.
Brent crude for April settlement fell $2.96, to close at $97.52 a barrel. Futures reached $102.29 a barrel yesterday.
Gold
Gold fell as lower energy prices eroded the metal's appeal as an inflation hedge. The metal for April delivery dropped 1.8 percent to $966.30 an ounce, after reaching a record $992 yesterday.
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