Trader's Highlight

DJI- NEW YORK, July 25 (Reuters) - The S&P 500 fell for a fourth day and the Nasdaq dropped on Wednesday after a rare earnings stumble from Apple, while strong results from Boeing and Caterpillar lifted the Dow.

Apple Inc AAPL.O, the most valuable U.S. company by market capitalization, reported sales late on Tuesday that fell short of Wall Street's expectations as the European economy sagged and consumers held off buying iPhones before a new version expected in the autumn.

Shares fell 4.3 percent to $574.97. Without Apple's losses, the S&P would have ended higher.

The price-weighted Dow industrials managed gains thanks to Caterpillar CAT.N and Boeing BA.N. Caterpillar rose 1.4 percent to $82.60 after its quarterly profit easily beat Wall Street's expectations.

The world's largest maker of construction machines also raised its 2012 forecast.

“Expectations have been very low and this is a huge positive for the market,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

Hope that the Federal Reserve will act soon to provide more stimulus to the economy also supported stocks. A report in The Wall Street Journal on Tuesday said Fed officials may be moving closer to taking more steps to aid the flagging economy. (nL2E8IO9QA)

Because of those expectations "bank stocks are performing relatively well," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas. The KBW bank index .BKX was up 0.5 percent.

The Dow Jones industrial average .DJI rose 58.73 points, or 0.47 percent, at 12,676.05. The Standard & Poor's 500 Index .SPX was down 0.42 point, or 0.03 percent, at 1,337.89. The Nasdaq Composite Index .IXIC was down 8.75 points, or 0.31 percent, at 2,854.24.

NYMEX- NEW YORK, July 25 (Reuters) - U.S. crude futures rose for a second straight session on Wednesday, shrugging off higher inventories and supported by hopes that the Federal Reserve will provide more economic stimulus coupled with concerns about Middle East turmoil.

U.S. crude oil stocks rose more than expected last week while gasoline and distillate inventories also increased, weekly data from the Energy Information Administration showed.

CBOT SOYBEAN- Chicago Board of Trade soybean futures rose on concerns about shrinking crop

size as the U.S. drought remains intact.

* Rain this week and for the next 10 days will boost crop prospects in the northern and eastern U.S. Midwest, but crops in the rest of the growing region will struggle against extreme heat and drought, an agricultural meteorologist said.

• "There is improvement in the north and east and we expect more showers today and tomorrow in the west central to northwest," said Don Keeney, meteorologist for MDA EarthSat Weather.

• Malaysian crude palm oil rebounded on Wednesday on bargain hunting after prices hit a five-week low earlier in the session, although gains were modest as investors remained worried that the euro zone debt crisis could hurt demand.

• August was above all key moving averages. The nine-day RSI stood at 63.

FCPO- SINGAPORE, July 25 (Reuters) - Malaysian crude palm oil rebounded on Wednesday on bargain hunting after prices hit a five-week low earlier in the session, although gains were modest as investors remained worried that the euro zone debt crisis could hurt demand.

The euro zone's private sector shrank for a sixth month in July as manufacturing output nosedived, notably in Germany and France, adding to the likelihood that the bloc will slump back into recession, business surveys showed on Tuesday.

Market players also priced in weaker Malaysian exports for the July 1-25 period after cargo surveyor Intertek Testing Services reported a 14 percent monthly drop.

"The market recovered today as it was a little bit oversold. Exports were down 14 percent but that has already been factored in considering the market dropped close to 200 ringgit in the last few days," said a trader with a foreign commodities brokerage in Malaysia.

The benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange edged up 0.9 percent to close at 2,951 ringgit ($930) per tonne. Prices earlier dropped to 2,898 ringgit, the lowest since June 18.

Traded volume stood at 45,813 lots of 25 tonnes each, higher than the usual 25,000 lots.

REGIONAL EQUITY- BANGKOK, July 25 (Reuters) - Most Southeast Asian stock indexes posted small gains on Wednesday, with the newly listed IHH Healthcare Bhd IHHH.KL leading Malaysia higher.

Malaysia's main index .KLSE edged up 0.15 percent, regaining some lost ground from a drop of 0.8 percent in the past four sessions, with IHH, Asia's largest hospital operator, jumping as much as 14 percent in its trading debut in Kuala Lumpur.

Trader's Highlight

DJI- NEW YORK, NEW YORK, July 24 (Reuters) - Wall Street stocks fell on Tuesday, hit by signs the euro zone crisis is worsening and evidence that Europe's slowdown is hurting U.S. companies, including bellwether UPS.

The decline was the third straight for the S&P 500 index, which tested its 50-day moving average, a technical support level which could trigger more selling if convincingly broken.

Stocks got a lift late in the session after the Wall Street Journal said Federal Reserve officials were moving closer to taking new steps to spur activity and hiring. Fed officials recently have spelled out what measures they might take, including Chairman Ben Bernanke in a speech last week.

After the market's close, S&P 500 and Nasdaq futures fell on disappointing results from Apple, which reported quarterly revenue below analysts' expectations. Apple's shares fell 4.8 percent to $572.12 in extended-hours trading. 

During the regular session, United Parcel Service, seen by many as a proxy for economic activity, fell 4.6 percent to $74.34 after reporting quarterly results that missed forecasts and cut its 2012 outlook, citing uncertain global economic conditions. UPS helped pull the Dow Jones Transportation average down 1.2 percent.

"We are going through an adjustment period where there has been a lot of talk about Europe facing a recession in 2012. Now we are actually seeing it in the earnings and the market is reacting to that," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

The struggles of the U.S. and euro zone economies intensified in July, surveys showed on Tuesday. Europe's private sector looked set for a prolonged slump as the surveys showed the downturn that began in the euro zone's small economies has since become entrenched in Germany and France.

Concerns about the euro zone grew after Spain was forced to pay the second highest yield on short-term debt since the launch of the euro and European Union officials said Greece had little hope of meeting the terms of its bailout. 

AT&T Inc lost 2.1 percent to $34.63 after the company reduced its outlook for business services this year. The S&P telecom index dropped 1.8 percent. 

Whirlpool Corp slumped 7.5 percent to $62.25 after the world's largest appliance maker missed Wall Street's expectations for quarterly earnings and sales, hurt by weak demand in Europe and a stronger dollar.

The Dow Jones industrial average was down 104.14 points, or 0.82 percent, at 12,617.32. The Standard & Poor's 500 Index was down 12.21 points, or 0.90 percent, at 1,338.31. The Nasdaq Composite Index was down 27.16 points, or 0.94 percent, at 2,862.99.

The Fed says it is still considering a third bout of quantitative easing, or QE3, and some analysts expect recent weakness in the U.S. economy could prompt policymakers to launch such a program as early as September. 

"Given the events going on around the world, I think the odds are increasing the Fed will take action at one of the next two meetings," said Michael Sheldon, chief market strategist, RDM Financial, Westport, Connecticut.

Of the 145 companies in the S&P 500 that have reported earnings for the quarter, 66.9 percent have beaten analysts' expectations, Thomson Reuters data showed. Over the past four quarters, 68 percent have beaten estimates.

Cisco Systems Inc fell 5.9 percent to $15.12 after VMWare Inc said it would acquire privately held Nicira Inc, a move seen as a threat to Cisco's core switching and routing business.

In another sign of the economic malaise from Europe, Texas Instruments Inc warned that its third-quarter revenue would be weaker as customers show caution due to global uncertainties. The shares lost 0.9 percent to $26.57. 

Spanish five-year government bond yields rose above 10-year yields for the first time since June 2001 as investors fretted about the possibility that Madrid may need a full-blown sovereign bailout. The 10-year note last traded at around 7.6 percent.

Volume was about 6.71 billion shares on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.74 billion shares.

Decliners beat advancers on the NYSE by about 22 to 7. On the Nasdaq, decliners beat advancers about 17 to 7.

NYMEX- NEW YORK, TOKYO, July 24 (Reuters) - U.S. crude futures extended declines into a third day on Tuesday from a 4 percent fall the day before, as concerns that Spain might need a bailout raised anxiety about the euro zone debt crisis and its impact on global oil demand.

CBOT SOYBEAN, Chicago Board of Trade soybean futures fell sharply  on forecasts for crop-friendly rains in portions of the U.S. Midwest crop belt.

* Rainfall in the northern U.S. Midwest over the next 10 days will provide some relief for the drought-stricken corn and soybean crops, an agricultural meteorologist said on Tuesday.

• "It's a wetter forecast than we saw earlier. There's a better chance of rain from Minnesota, into Michigan and into the eastern Ohio River Valley," said Jason Nicholls, meteorologist for AccuWeather.
• A Reuters poll of 11 analysts on Tuesday indicated a U.S. soybean yield at 38.6 bushels per acre and soybean production at 2.9 billion bushels.
• The August contract was above all key moving averages. The nine-day RSI was at 57.

FCPO- SINGAPORE, SINGAPORE, July 24 (Reuters) - Malaysian crude palm oil futures dropped to the lowest level in five weeks on Tuesday, extending losses from the previous day as forecasts for rain in the U.S. Midwest improved the production outlook for soybeans.

An improved production outlook for soybeans could see a higher supply of competing soybean oil, narrowing its premium to palm oil and attracting some demand away from the tropical oil.

A gloomy global economic outlook also weighed on palm oil and other commodity markets, with a surge in Spain's borrowing costs raising concern that the country could seek a costly bailout.

"Prices are reflecting macroeconomic risk aversion, but technically palm prices are terribly oversold," said a trader with a local commodities brokerage in Malaysia. "Prices have again became attractive and exports should soon show signs of recovery. Consumers will soon bargain-hunt as prices are relatively cheap."

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange lost 2.1 percent to close at 2,926 ringgit ($921) per tonne after trading as low as 2,904 ringgit, the lowest since June 18.

Traded volume stood at 38,763 lots of 25 tonnes each, much higher than the usual 25,000 lots as investors rushed to liquidate their positions.

Weather updates on Monday forecast some rains for soybean crops in the U.S. Midwest this week, helping to offset a weekly crop condition report from the U.S. Department of Agriculture that downgraded soy crop ratings. 

Investor sentiment also weakened as the euro was not far from a two-year low against the dollar, undermined by Moody's change in its ratings outlook to negative for Aaa-rated Germany, the Netherlands and Luxembourg amid Europe's ongoing debt crisis.

Palm oil traders will be looking out for Malaysia's palm oil export data for the July 1-25 period, due to be released on Wednesday, after shipments fell 23 percent over the first 20 days of July from a month earlier.

The market is also watching for signs of El Nino returning to Southeast Asia as the hot and dry weather could hurt palm oil output for top producers Indonesia and Malaysia.

In other markets, crude oil rose above $103 per barrel on Tuesday after China's economy showed signs of improvement, but gains were checked by further evidence of damage to Europe's economy.

Declines in other vegetable oil markets underlined similar investor concerns over wetter weather in the U.S. and the euro zone debt crisis.

By 1004 GMT, the most active U.S. soyoil for December delivery was down 2.3 percent. The most active January 2013 soyoil contract on the Dalian Commodity Exchange closed 2.7 percent lower.

REGIONAL EQUITY- BANGKOK, July 24 (Reuters) - Stocks in Singapore, Thailand and the Philippines posted small gains in light trading on Tuesday, led higher by banking shares, but the broader sentiment remained weak as gloomy German factory data overshadowed signs of an improvement in China.

Singapore's Straits Times Index finished up 0.53 percent, regaining early lost ground. The Thai SET index and the Philippine index rebounded from an earlier drop to end up 0.21 percent and 0.4 percent, respectively.

Other markets in the region ended lower, with Malaysian shares down 0.2 percent at their lowest close since July 16. Indonesia's slid 0.4 percent to its lowest close since July 13. Vietnam stocks dropped 1.5 percent to a one-week low. 

Trader's Highlight

DJI- NEW YORK, NEW YORK, July 23 (Reuters) - U.S. stocks fell for a second straight session on Monday, as Spain appeared closer to needing a national bailout and poor corporate results weighed on the market.

Still, stocks ended well off the day's lows, rebounding from their initial plunge. Stocks appeared to stabilize as the S&P 500 approached its 50-day moving average of 1,332.98, a technical support level that could trigger more losses if convincingly broken.

Overall, three stocks fell for every one that rose on the New York Stock Exchange on Monday, a signal that the afternoon rebound was concentrated among larger-cap shares. On the Nasdaq, about four stocks fell for every one that rose.

"The sell-off this morning was overdone, and obviously, the market felt that way, too," said Eric Green, senior portfolio manager and director of research at Penn Capital Management in Philadelphia, which oversees $6.5 billion.

"Nothing incrementally negative came out, but obviously, we're still worried about the situation there."

The Spanish region of Murcia looked set to follow Valencia in tapping a government program to keep its finances afloat. Local media reported half a dozen regions were ready to follow suit. 

Valencia's move contributed to a 1 percent drop in the S&P 500 on Friday. The benchmark index had appeared on track to exceed those losses on Monday, falling as much as 1.8 percent before recovering some of those losses.

The International Monetary Fund dismissed a weekend news report in German weekly Der Spiegel that it may refuse to continue supporting Greece as it prepares for talks with the new Greek government on its international bailout. 

After the closing bell, Texas Instruments Inc shares dropped 1.4 percent to $26.44 in extended trading following the company's results. Texas Instruments reported a drop in its second-quarter profit and sales.

With 23 percent of S&P 500 companies having reported results, 67.5 percent have posted earnings above expectations, although many analysts have cut their forecasts in recent weeks, allowing for easier beats. Over the past four quarters, 68 percent of companies beat estimates.

The high-profile earnings disappointments have taken a toll on third-quarter estimates. Third-quarter S&P 500 earnings growth is now expected to come in at 0.9 percent, down from 3.1 percent at the beginning of the month.

The Dow Jones industrial average fell 101.11 points, or 0.79 percent, to close at 12,721.46. The Standard & Poor's 500 Index declined 12.14 points, or 0.89 percent, to 1,350.52. The Nasdaq Composite Index shed 35.15 points, or 1.20 percent, to close at 2,890.15.

At its session low, the Dow was down as much as 239.16 points, or 1.9 percent, at 12,583.41. The S&P 500 fell as low as 1,337.56, down 25.1 points, or 1.8 percent, at its session low. The Nasdaq had touched a session low at 2,852.88, down 72.42 points, or 2.5 percent from Friday's close.

Energy shares slumped as fears of a global slowdown prompted investors to sell oil as U.S. crude fell 3.8 percent. Chevron Corp dropped 1.1 percent to $107.95. The NYSE Arca oil index lost 1.7 percent.

The CBOE Volatility Index jumped 14.4 percent to 18.62 at the close. According to the VIX Open Interest Put-to-Call ratio, VIX options traders are holding only 50 puts for every 100 calls outstanding on the VIX. The last time this ratio hit this level was early August of 2011, just before a huge volatility spike that lasted nearly four months, he said.

The euro slid to a two-year low against the dollar and a near 12-year trough against the yen, pressured by fears that Spain may eventually need a full sovereign bailout.

The yield on the Spanish 10-year bond was last at 7.496 percent, well over what analysts consider a sustainable level.

Volume was light, with about 6.13 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.

NYMEX- NEW YORK, NEW YORK, July 23 (Reuters) - The euro fell to a two-year low against the U.S. dollar and a nearly 12-year trough against the yen on Monday on fears Spain was closer to needing a full-scale bailout that the euro zone cannot afford.

Ten-year Spanish bond yields jumped as high as 7.596 percent, the highest since the euro was created in 1999. That saw the euro drop for a fourth straight day against the dollar to hit a low of $1.2067, the weakest since June 2010.

Traders and analysts say the euro looks poised to take out the key $1.20 threshold. A break beneath that could see the currency head towards its June 2010 low of $1.1875, which marked the weakest since March 2006.

"With the 10-year yield above 7 percent and quickly approaching 8 percent, we're at that moment where it starts to look a lot more real than it was even just a few weeks ago," said John Doyle, foreign-exchange strategist at Tempus Consulting in Washington, referring to a full-scale sovereign bailout for Spain.

The euro extended declines against the dollar in late Monday trading after Moody's Investors Service changed its ratings outlook to negative for Aaa-rated Germany, the Netherlands and Luxembourg, citing uncertainty about the euro zone's ongoing debt crisis. 

The ratings agency said it saw an increased chance that troubled euro zone countries such as Spain and Italy would need more support, the burden of which would fall on the highest-rated states.

Adding to pressure on the euro was a weekend report that the International Monetary Fund may refuse to contribute further funding for Greece. The IMF dismissed the report, saying it was “supporting Greece in overcoming its economic difficulties.”

The European Central bank, the European Commission and the International Monetary Fund -- known as the troika -- will arrive in Athens on Tuesday to push for further cuts needed for the country to qualify for further rescue payments.

The euro last traded at $1.2135, down 0.2 percent. After closing at $1.2156 in New York on Friday, it "gapped" lower to open at $1.2120 in Asia on Monday morning, signifying the market perceived the value of the euro had dropped over the weekend in response to events in the euro zone.

Some $6.46 billion of euros have changed hands on Reuters Dealing through the Monday session.

Against the yen, the euro hit 94.22 yen, a level not seen since late 2000, and last was off 0.3 percent to 95.11.

Weakness in the euro was seen across the board as it also hit a record low versus the Australian dollar, a more than 3-1/2-year low against sterling and a 9-1/2-year low versus the Norwegian crown.

Spain's Economy Minister Luis de Guindos ruled out a full-scale financial rescue on top of the 100 billion euros already earmarked for the country's banks.

Ashraf Laidi, chief global strategist at City Index Ltd. in London, said some economists estimate a second bailout for Spain could amount to as much as 300 billion to 400 billion euros.

FUNDING STRAINS

Tiny Murcia was on course to be the second Spanish region to request help from the central government, and media reported half a dozen local authorities were ready to follow in the footsteps of heavily indebted Valencia, which rattled markets on Friday.

Catalonia, Spain's biggest region by gross domestic product, also has the highest debt. It said this week it had not decided whether to tap the funding mechanism, though it is seen as an increasingly likely candidate.

Axel Merk, portfolio manager of the $500 million Merk Hard Currency Fund in Palo Alto, California, said the market is pricing in the reality that "the Spanish government is now clearly on the hook for the regions’ debt.

"Spain’s central government is expected to bail out its regions – and in return may ask for a bailout itself," he wrote to clients. "As long as debt is merely shuffled around, the euro zone crisis won’t be solved."

Italy may be under similar pressure, with a newspaper quoting unnamed government specialists as saying that 10 Italian cities including Naples and Palermo face problems managing their finances.

The dollar fell to a seven-week low of 77.95 yen, before rebounding to 78.43, little changed on the day.

Japan's vice finance minister for international affairs was reported as saying the country will not exclude any options when responding to excessive currency moves, although traders said the authorities were unlikely to consider intervening while the dollar held above 76 yen.

CBOT SOYBEAN, Chicago Board of Trade soybean futures fell sharply on forecasts for crop-friendly rains in portions of the U.S. Midwest crop belt and on falling

equities markets.

* Midday weather updates still indicate some rain for corn and soybean crops in the northern U.S. Midwest this week and there is a better chance for crop-friendly weather in the extended outlooks, an agricultural meteorologist said on Monday.

• "There will be some rains in the north early this week and the southwest should see some light rain late in the week, which would be the first significant rain since June," said Andy Karst, meteorologist for World Weather Inc.
• Meteorologists said the showers won't be "drought busters" but "it will h elp some crops that aren't already dead," Karst said. Karst also said the midday weather updates indicate a better chance for showers and cooler weather in the Midwest in early August.
• "It looks cooler and wetter in the Midwest Aug. 4-7 and we've added some rain for the eastern Corn Belt for July 30 to Aug. 1st," he said.
• A Reuters poll indicated another decline in soybean condition ratings in the USDA's weekly crop progress report to be released late on Monday.
• Another Reuters poll showed an expected decline of 15 percent from record high prices for soybeans by the end of the year but still at an end-of-year record high of $15.40, up 28.5 percent from the close of 2011.
• Goldman Sachs on Monday pegged U.S. soybean yield per acre at 39.5 bushels and raised its three-month forecast for soybean prices to a record $20 per bushel.
• August was above all key moving averages. The nine-day RSI was at 68.

FCPO- SINGAPORE, SINGAPORE, July 23 (Reuters) - Malaysian crude palm oil futures dropped to the lowest in more than a month on Monday, tracking broader financial market weakness on fresh concern over Spain's ability to avoid a costly bailout that could worsen the euro zone debt crisis.

Risky financial assets including crude oil and grains futures suffered declines as investors liquidated their positions on concern that the debt crisis could stall global growth and damp fuel and food demand.

Half a dozen local governments were ready to follow in the footsteps of Valencia, which on Friday said it would need help from Madrid, Spanish local media reported. 

Relentless heat in the U.S. grain belt continued to destroy soybean crops and tighten soybean oil supply, but analysts said investors took cues from macroeconomic factors instead.

"It's been two weeks that we've been talking about the U.S. weather, so the weather risk has already been factored in unless we hear something new coming from El Nino," said Ker Chung Yang, commodities analyst with Phillip Futures in Singapore.

"There's news about Valencia seeking a bailout that has pushed Spanish bond yields to new high and that could weigh on the market."

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange lost 1.7 percent to close at 2,990 ringgit ($943) per tonne. Prices earlier touched a low at 2,969 ringgit, the lowest since June 22.

Traded volume stood at 27,369 lots of 25 tonnes each, higher than the usual 25,000 lots.

Traders said the weak sentiment was due in part to slow exports and higher production in No.2 producer Malaysia, which could boost palm oil stocks after they fell to a 14-month low in June.

Malaysia's palm oil exports fell 23 percent over the July 1-20 period from a month earlier, said cargo surveyors Intertek Testing Services and Societe Generale de Surveillance. 

Exports to China slowed by more than half for the period on high stockpiles and a slowdown in demand after China's economy showed signs of slowing, said a Singapore-based trader.

But the market is also watching for signs of El Nino returning to Southeast Asia as the hot and dry weather could hurt palm oil output for top producers Indonesia and Malaysia.

In other markets, crude oil prices slipped towards $103 per barrel on Monday as investors sold off riskier assets and fled for the perceived safety of the dollar on fears that Spain will be unable to avoid a costly sovereign bailout. 

Concern over the euro zone debt crisis also weighed on other vegetable oil markets.

By 1005 GMT, the most active U.S. soyoil for December delivery was down 1.7 percent and the most active January 2013 soyoil contract on the Dalian Commodity Exchange had lost 2.2 percent.

REGIONAL EQUITY- BANGKOK, July 23 (Reuters) - Southeast Asian stock indexes closed lower after light volume trading on Monday as investors sold risk assets amid concerns Spain might require a full sovereign bailout, while Thai shares fell nearly two percent on PTTEP's capital raising plan.

The Thai benchmark SET index finished down 1.9 percent, its biggest percentage drop in one day since June 1. Energy explorer PTT Exploration and Production Pcl dropped 4.8 percent to its lowest close in six weeks. 

Other markets also came under selling pressure with Jakarta stocks ending down 1.8 percent at a one-week low and Philippine stocks dropping 1.4 percent to their lowest close in almost a month.

Singapore's Straits Times Index was down 1.1 percent at a one-week low. Malaysian shares and Vietnam's stock index fell 0.4 percent and 0.6 percent, respectively. 

Trader's Highlight

DJI- NEW YORK, NEW YORK, July 20 (Reuters) - U.S. stocks broke a three-day winning streak on Friday as Europe's debt crisis engulfed markets with renewed fears that Spain may be unable to dodge a costly bailout.

The news that the heavily indebted region of Valencia asked Madrid for financial aid interrupted a period of relative calm for Wall Street and raised the specter that the euro zone's fourth-largest economy may itself need to be rescued. 

Bank shares, sensitive to signs of trouble in Europe, were among the biggest losers. The KBW bank index fell 1.9 percent, taking its weekly decline to 2.3 percent. Shares in Morgan Stanley fell 3.5 percent to $12.78.

Valencia, which already used several government credit lines in the first half of the year to meet debt repayments, still needs to repay 2.85 billion euros by the end of the year. That figure is not huge compared to the billions used in other EU bailouts, but investors are concerned about the overall stability of the country and its banks.

"We don't want to go to a full Spanish bailout if we don't have to," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "Maybe the market is just over reacting to it, but these days you never know."

The Dow Jones industrial average was down 120.79 points, or 0.93 percent, at 12,822.57. The Standard & Poor's 500 Index was down 13.85 points, or 1.01 percent, at 1,362.66. The Nasdaq Composite Index was down 40.60 points, or 1.37 percent, at 2,925.30.

The euro slid broadly, setting a two-year low against the dollar. The single currency fell as low as $1.2143, its weakest level since mid-June 2010. Spanish benchmark bond yields hit euro-era highs as the yield on the 10-year bond reached 7.3 percent.

Europe had been on the back burner for much of July, allowing Wall Street to move higher. Since early June the S&P 500 has gained about 7 percent, helped by a deal to save Spanish banks and a European Union summit that pointed to greater resolve among EU leaders.

Even with Friday's loss, the S&P 500 posted its second weekly gain in a row, climbing 0.4 percent. The Dow ended up 0.4 percent and the Nasdaq composite index rose 0.6 percent for the week.

The resurfacing of euro zone debt problems in the headlines was a reminder that the bloc's problems are far from over. Spain's government also cut its economic growth forecast, indicating the country would stay mired in recession well into next year.

"It looks as if Europe is taking center stage again, with Spain as the main act," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

A gauge of European banks dropped 3.7 percent and Spain's equity benchmark fell 5.8 percent, its largest daily percentage drop in more than two years.

The S&P on Thursday hit a 2-1/2 month high as record high prices in Treasuries kept yield-seekers focused on stocks despite a softening economy. Bets on further Federal Reserve action in support of the economy are also credited for helping equities to hold up despite poor economic data.

About 6.7 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, inline with the 50-day moving average.

Decliners beat advancers by a ratio of about 2 to 1 on the NYSE and on the Nasdaq by almost 3 to 1.

NYMEX- NEW YORK,NEW YORK, July 20 (Reuters) - U.S. crude futures fell on Friday, snapping a string of seven higher finishes, as the euro zone debt crisis brought economic concerns back in focus and strengthened the dollar. The front-month August contract expired at the end of the session.

CBOT SOYBEAN- Chicago Board of Trade soybean futures soared to a record high as the U.S. Midwest drought worsened and on strong cash markets, tight stocks, slow farmer selling and strong soymeal, traders said.

* Spot soybean futures rose to a record high $17.77-3/4, above the previous record of $17.49 set on Thursday and up 35 percent in only six weeks.

• No change in weather forecasts were noted on Friday with hot and dry weather expected from now through early August in the central and western U.S. Midwest which will cause further damage to corn and soybean crops that already have been nearly decimated in some areas, an agricultural meteorologist said on Friday.
• "It will be dry and very hot in the area with temperatures in the 100s (degrees Fahrenheit) in St. Louis Sunday through Thursday reaching 106 F on Wednesday," said Don Keeney, meteorologist for MDA EarthSat Weather.
• The United Nations food agency is worried about an ongoing drought-fuelled grain price rally and sees no respite in price rises for the time being, a senior economist and grain expert at the Food and Agriculture Organisation (FAO) said on Friday.
• Low water on the Mississippi River reduced allowable barge drafts and restricted tow sizes, resulting in a slowdown in the flow of grain and soybeans to the Gulf, shipping sources said. Little relief in sight for river levels as the largest U.S. drought since 1956 continues to expand.
• August is above all key moving averages. The nine-day RSI was at 88.

FCPO- SINGAPORE, SINGAPORE, July 20 (Reuters) - Malaysian crude palm oil futures ended lower on Friday, as expectations of higher palm oil stocks in Malaysia offset concerns over crop-damaging weather in the U.S. Midwest that lowered soybean oil supply.

Palm oil futures posted an 0.8 percent weekly loss, as weather-driven gains were capped by weak exports and higher production in No.2 producer Malaysia, which could push stocks up in July after they fell to a 14-month low last month.

"From the inventory level alone, it is negative to prices. But the dry season in the United States is still very much in the picture," said Alan Lim, research analyst with Malaysia's Kenanga Investment Bank.

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange were down a slight 0.1 percent to close at 3,042 ringgit ($965) per tonne.

Traded volumes stood at 25,325 lots of 25 tonnes each, slightly higher than the usual 25,000 lots.

Malaysia's palm oil exports fell 23 percent over the July 1-20 period from a month ago, cargo surveyors Intertek Testing Services and Societe Generale de Surveillance said. 

Slower exports, coupled with higher output expected for July, could boost palm oil stocks and ease concerns about tight oilseeds supplies.

Late on Thursday, India lifted a six-year-old freeze on the base import price of refined palmolein, a move that will make palm oil imports from Indonesia more costly. 

Traders said the move to protect domestic refiners could support crude palm oil prices as the demand outlook for the feedstock brightens.

The move, which effectively doubled import taxes on refined products of the edible oil, could also see a drop in exports and push rival Malaysia to overhaul its taxes.

In related market, Brent crude slipped below $107 per barrel on Friday as worries about a conflict in the Middle East eased slightly, lowering palm oil's appeal to be used as an alternative for biofuel.

In other vegetable oil markets, the most active U.S. soyoil for December delivery was almost flat while the most active January 2013 soyoil contract on the Dalian Commodity Exchange closed 0.2 percent higher.

REGIONAL EQUITY-July 20 (Reuters) - Most Southeast Asian markets eased on Friday in thin trading volumes as Spain borrowing cost weighed on investor sentiment, but Malaysia and Indonesia saw foreign inflow into equity despite falls.

Malaysia, despite edging down 0.1 percent, enjoyed a foreign inflow of $72.55 million, while Indonesia saw $6.56 million net foreign buying, though the stock market fell 0.4 percent.

Optimism over strong corporate earnings in the previous day evaporated due to renewed fears over Spain's borrowing costs, which hovered around their seven percent pain threshold on Friday, despite the expected approval of its bank bailout plan later in the day. 

Singapore shares fell 0.4 percent from a one-year closing high, snapping five consecutive sessions of gains, while Thailand also fell 0.4 percent led by energy and banking shares.

Bucking the trend, the Philippines gained 0.4 percent after falling in the previous three sessions. 

Trader's Highlight

DJI- NEW YORK, July 19 (Reuters) - Global shares climbed to two-week highs on Thursday as strong corporate earnings offset weak U.S. economic data but concerns about Spain's financial troubles drove the euro broadly lower.

Commodities rallied, with oil prices hitting eight-week highs as Middle East tension stoked supply concern. Corn and soybeans soared to record highs after a worsening U.S. farm-belt drought raised fears about a possible food crisis.

On Wall Street, the S&P 500 index rallied to a fresh 2-1/2-month peak, lifted by a strong full-year outlook from IBM IBM.N, bullish earnings from eBay EBAY.O and Qualcomm's QCOM.O expectations for a strong December quarter. European equities hit four-month highs also on strong corporate results.

The positive sentiment was tempered, however, by weaker-than-expected readings on U.S. manufacturing, housing and labor markets. Adding to investor concern was a spike in Spain's borrowing costs, which intensified fears Madrid may eventually need a full-blown sovereign bailout.

"It is baked into stock prices that growth is going to be slow for a little while," said Giri Cherukuri, head trader at OakBrook Investments in Lisle, Illinois.

"People are focusing on individual stocks after earnings and trying to figure out (through) outlooks how weak the economy really is," he said.

The Dow Jones industrial average .DJI ended up 34.66 points, or 0.27 percent, at 12,943.36. The Standard & Poor's 500 Index .SPX closed up 3.73 points, or 0.27 percent, at 1,376.51. The Nasdaq Composite Index .IXIC rose 23.30 points, or 0.79 percent, to 2,965.90.

NYMEX- NEW YORK, July 19 (Reuters) - U.S. crude futures rose 3 percent on Thursday, up for a seventh straight session and reaching an eight-week peak, as Middle East tensions reinforced concern about potential supply disruptions and strong corporate earnings lifted investor optimism.

 

CBOT SOYBEAN- * Spot soybean futures rose to a record high $17.49, above the previous record of $16.85-1/2 set on Wednesday and up 33 percent in only six weeks.

• Midday weather updates indicate little change in outlooks for a continued spread of the worst drought in a half century through most of the U.S. Midwest crop region for at least the next 10 days, meteorologists said on Thursday.

• "Only minor changes for next week. There is a reduction of rain and warmer for the northern Plains for the 29th and 30th but that's pretty far out, we're taking out rains for the end of the month," said Andy Karst, meteorologist for World Weather Inc. "It's not a better forecast for crops," he said.

• Hotter-than-normal temperatures are expected through October over most of the contiguous 48 U.S. states, with below-average precipitation for Midwest areas already hit by the worst drought in a half century, government forecasters said on Thursday.

FCPO- SINGAPORE, July 19 (Reuters) - Malaysian crude palm oil futures rebounded from a 3-week low on Thursday, as the worst drought in the United States since 1956 threatened to squeeze global oilseed supplies further and offset slower exports and better output in Malaysia.

Oppressive heat and a worsening drought in the U.S. Midwest pushed grain prices near or beyond records this week and raised concerns of a smaller supply of soybean oil, shifting more demand to the cheaper palm oil.

"The market is staged for a rebound as drought concerns are revived. Also, palm oil is now at a discount of over $260 to soyoil, and that will attract arbitrage activity to narrow the spread," said a dealer with a foreign commodities brokerage in Malaysia.

The benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange gained 1.7 percent to close at 3,045 ringgit ($966) per tonne after touching a low of 2,986 ringgit, a level unseen since June 28.

Traded volumes stood at 31,771 lots of 25 tonnes each, higher than the usual 25,000 lots.

REGIONAL EQUITY- July 19 (Reuters) - Singapore stock market rose to a near one-year closing high on Thursday, helped by improved investor sentiment after strong corporate earnings from U.S. bellweathers such as Intel Corp INTC.O, while Southeast Asia's other markets ended mixed.

Singapore .FTSTI ended 0.4 percent up led by property developer City Developments Ltd's CTDM.SI 1.6 percent gains and Vietnam .VNI, the region's smallest bourse, jumped 2.3 percent to a four-week high in heavy volumes, also on hopes of strong quarterly earnings.

Groundbreaking on new U.S. homes rose in June to its fastest pace in over three years supported the market, after a series of recent reports had pointed to worrying signs that the economy was cooling.

 

Indonesia .JKSE gained 0.4 percent to its highest since May 11, helped by a foreign inflow of $42.7 million while Malaysia .KLSE ended flat amid foreign investors buying $23.67 million in equity.

Thailand .SETI fell 0.6 percent, dragged down by telecom shares on concerns over a possible fresh tax on telecom operators with the biggest operator Advanced Info Service ADVA.BK and Total Access Communication DTAC.BK falling 3.5 percent and 3.4 percent respectively.

RTRS- USDA'S Vilsack say drought will spike prices

WASHINGTON, July 18 (Reuters) - U.S. Agriculture Secretary Tom Vilsack said the worsening Midwest drought will result in sharply higher crop prices, but there is no need yet to seek a reduction in corn-based ethanol production.


Vilsack urged Congress to work with the Obama Administration on ways to improve aid to farmers struggling with a crop that will be sharply reduced from the searing heat and lack of rain.

RTRS- Dry weather to keep Cargill palm output flat in 2012

JAKARTA, July 18 (Reuters) - Crude palm oil output at Cargill will be unchanged at 300,000 tonnes this year, the U.S. agribusiness company said on Wednesday, as dry weather in Indonesia hurts production.

Crude palm oil shipments from the world's top producer have been hit by dry weather this year. For most of the archipelago, the rainy season is from October until April, although this can fluctuate.

"Why no improvement? We've gone through dry spells," said John Hartmann, chief operating officer at Cargill Tropical Palm Holdings, which runs the company's palm oil plantations, all of which are in the archipelago.

"The last two months have been very dry, and it's having an impact on our production," Hartmann told Reuters.

Cargill's plantations are in South Sumatra and West Kalimantan.

"Kalimantan was down and is recovering, and now we're seeing the down cycle go through Sumatra," Hartmann said.

Minneapolis-based Cargill, one of the world's largest privately held corporations, has about 70,000 hectares of palm oil plantations, up 6,000 hectares on 2011, said Hartmann.

"I don't know if it is an El Nino type of impact or not but certainly we went through a three-year cycle of above average rainfall, and now for the last 12 months or so it's been below average," he added.

Indonesia is not the only major commodity producer suffering from dry weather. The U.S. grain belt has been scorched by the worst drought since 1956, cutting estimated output and quality of corn and soybean crops, and bumping up benchmark global prices. (nL2E8IGFYC)

Malaysian crude palm oil futures dropped to a near three-week low on Wednesday, as traders booked profits partly on weaker exports and better production outlook in Malaysia after the U.S. weather-fuelled rally.

Weather, softening demand and falling oil prices could all play a role in prices for the second half, said Hartmann, who was unable to give an exact forecast.

Trader's Highlight

DJI- NEW YORK, July 18 (Reuters) - The S&P 500 touched its highest level since early May on Wednesday as corporate profits from bellwethers like Intel and Honeywell defied fears of a collapse in earnings.

Based on the latest available data, the Dow Jones industrial average .DJI was up 102.10 points, or 0.80 percent, at 12,907.64. The Standard & Poor's 500 Index .SPX was up 9.07 points, or 0.67 percent, at 1,372.74. The Nasdaq Composite Index .IXIC was up 32.56 points, or 1.12 percent, at 2,942.60.

NYMEX- NEW YORK, July 18 (Reuters) - U.S. crude futures rose a sixth session on Wednesday, reaching a seven-week peak as violence in Syria and tensions with Iran reinforced geopolitical fears and U.S. Federal Reserve Chairman Ben Bernanke downplayed the risk of a double-dip recession.

Gasoline posted the biggest percentage gain of the day in the oil futures complex, receiving lift from the government's inventory report showing gasoline stocks fell last week, against expectations for a rise.

CBOT SOYBEAN- Chicago Board of Trade soybean futures were higher on Wednesday led by strong cash markets, tight stocks, slow farmer selling and strong soymeal, traders said.

* August soymeal SMQ2 soared to a record high $514.00 per ton on strong cash, tight stocks and as traders buy old-crop futures amid fears of a U.S. soy crop shortfall due to the worsening drought.

• Traders were buying old-crop August soybeans on fears of a shortfall of U.S. soybean supplies amid the worst drought in the U.S. Midwest in over 50 years.

• Midday weather updates on Wednesday indicate more hot, dry weather for the U.S. Midwest, where corn and soybean crops are rapidly deteriorating amid the harshest drought in more than half a century.

• "It's a little wetter for next week in the west and southwest but even if the rains fall they would only be 0.50 inch or less so not much relief and confidence is low in that forecast," said Don Keeney, a meteorologist for MDA EarthSat Weather.

• U.S. Agriculture Tom Vilsack said the worsening Midwest drought will result in sharply higher crop prices, but there is no need yet to seek a reduction in corn-based ethanol production. (nL2E8II9EM)

• August is above all key moving averages. The nine-day RSI was at 82.

FCPO- SINGAPORE, July 18 (Reuters) - Malaysian crude palm oil futures slid to a near three-week low on Wednesday, as traders booked profits partly on weaker exports and better production outlook in Malaysia after a recent U.S. weather-fuelled rally.

Malaysia's July 1-15 palm oil exports tumbled more than 20 percent from a month ago at a time when stronger production is expected for the month. Slower exports and higher output could see palm oil stocks climb again after falling to a 14-month low in June.

But some traders kept a bullish outlook as the U.S. drought that damaged soybean crops could still shift demand to refined palm oil that is trading at a discount of above $200 to soyoil.

"I think the market just doesn't have enough push to go up further at the moment," said a Singapore-based trader with a commodities house.

The benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange fell 2.2 percent to close at 2,994 ringgit ($947) per tonne, after going as low as 2,990 ringgit -- a level unseen since June 28.

Traded volumes were high at 39,170 lots of 25 tonnes each, compared to the usual 25,000 lots.

REGIONAL EQUITY- BANGKOK, July 18 (Reuters) - The Philippines and Thailand stock markets fell on Wednesday while other markets edged up, but optimism over further stimulus by the U.S. Federal Reserve evaporated after its mixed signals on the global economy.

Fed Chairman Ben Bernanke offered a gloomy view of the U.S. economy at a semi-annual Congressional testimony on Tuesday, but hopes that the central bank is moving closer to more stimulus measures limited the day's losses.

The Philippines .PSI lost 1.2 percent and Thailand .SETI fell 0.3 percent.

All Southeast Asian markets except Thailand saw thin trading volumes compared to their respective 30-day averages after Bernanke's testimony.

Malaysia .KLSE bucked the trend, edging up 0.4 percent to hit a new all-time high close for the third straight session, helped by continuous foreign inflows. On Wednesday, it saw net foreign buying of $21.63 million in equities.

Singapore .FTSTI ended a tad firmer with a 0.1 percent gain, while Indonesia .JKSE closed steady.