Stocks struggle as gustav looms

Stocks struggled to remain above water Tuesday, caught in the crosswinds of a strong dollar and Hurricane Gustav. "We’re finally getting a little bit of a late August doldrums,"

said John Schloegel, vice president of Investment Strategies at CCAM. "I think investor sentiment is at the point where people are just taking body blow after body blow ... After so

many rounds of getting beaten up, you get fatigued," he said. "People are saying cash is the place to be, not push their money aruound in one way or another." Crude oil rose

more than $1 a barrel to settle at $116.27 a barrel amid concerns that Hurricane Gustav, which was upgraded to a Level 1 hurricane, could disrupt supplies. The U.S. National Hurricane Center

said it could hit the Gulf as a powerful Category 3 storm by Sunday. The DOLLAR continued to gather strength, hitting a six-month high against the euro after a report showed German business

sentiment fell to a three-year low in August, increasing expectations that the economy will tip into a recession. (TIME TO BRING YOUR CASH BACK HOME? CLICK ON THE VIDEO AT LEFT.) Minutes

from the Fed's latest meeting indicated that policy makers were concerned about slower consumer and business spending. Most Fed officials didn't think rates were too low given the

impact of the credit crunch, the minutes show, but nonetheless see the next direction for  rates is probably up. In economic news, prices of U.S. single-family homes dropped by a record 15.4

percentin the second quarter, according to a Standard & Poor's/Case Shiller report. However, the monthly rate of decline slowed in June from May, suggesting that the housing sector

may be stabilizing. New-home sales rose to an annual pace of 515,000 in July from the 17-year low of 503,000 in June, but still fell short of forecasts. The June number was revised downward

from the prior estimate of 530,000. Economists had expected the number to hold steady at 530,000. The inventory of homes for sale dropped by 5.2 percen to 416,000, the lowest level since

October 2004. The Conference Board's gauge ofconsumer confidence jumped to 56.9 in August from 51.9 in July, blowing past expectations for a reading of 53. U.S. chain-store sales grew

0.2 percent last week, strengthening slightly from the prior week's 0.1-percent increase, the International Council of Shopping Centers and UBS Securities said. World stocks hit their

lowest level in nearly two years as a worsening German business mood and fresh concerns about financial firms triggered a sell-off in risky assets. Lehman Brothers advanced as speculation

continues to swirl about the firm. Private-equity firm Kohlberg Kravis Roberts has a "high level of interest" in buying Lehman's crown jewel, the Neuberger & Berman

money-management firm, CNBC reported. Korea Development Bank has also been bandied about as a possible suitor but has raised concerns among Korean regulators. Fannie Mae and Freddie Mac

continued to rally amid growing optimism that maybe the stocks won't be wiped out. The home-financing giants said their investment portfolios grew in July but delinquencies reached

record levels, pressuring their capital positions. Citigroup said the two probably have enough capital to absorb losses through the end of the year. The companies are currently meeting

regulator deadlines for rolling over their debt. Goldman Sachs said there are probably several things the U.S. Treasury can do before seizing control of Fannie and Freddie, including easing

capital demands, buying mortgage securities from the pair or directly injecting capital. Shares of Fannie and Freddie also rallied on Monday as a $2 billion debt saleby Freddie triggered

some speculation that the firms wouldn't need a bailout. General Motors said Two Gulf Arab investors have expressed interest in buying its Hummer brand. Rival Ford announced plans to

spend $75 million to retool a Michigan SUV plant in order to build more cars and fuel-efficient vehicles. Ford's manufacturing chief said the auto maker doesn't plan to hire any

new entry-level, hourly workers until mid-2009 and that existing workers who have accepted buyouts will be released by year end. Ford has cut its hourly work force nearly in half to 54,000

in the past three years. There were a couple of downgrades in the tech sector: Marvell Technology slipped after Jefferies cut its rating on the stock to "hold" from

"buy," while Broadcom fell after Oppenheimer lowered its rating to "perform" from "outperform." In earnings news, corporate miner Rio Tinto posted a 55 percent

jump in first-half profit, on the back of its 2007 takeover of ALCAN and strong Chinese demand, and raised its dividend. Delta Air Lines said it tapped a $1 billion loan ahead of its planned

merger with Northwest Airlines and renegotiated its credit-card agreement to ensure revenue is turned over in a timely manner. THIS WEEK: MONDAY-THURSDAY: Democratic National Convention in

Denver TUESDAY: Fed minutes; Census bureau releases 2007 stats; Farmers' Almanac 2009 hits stores, predicts colder winter; Earnings from Smithfield Foods, Big Lots WEDNESDAY: Weekly

mortgage applications; durable goods; Fed's Lockhart speaks; weekly crude inventories; Report from Chicago Fed; Earnings from American Eagle, Dollar Tree THURSDAY: Jobless claims; GDP,

corporate profits; natural-gas inventories; Earnings from Sears Holdings, Tiffany and Dell; Barack Obama's acceptance speech FRIDAY: Personal income and spending; Chicago manuf. report;

consumer sentiment; farm prices WATCHERS: McCain VP announcement _Send comments to [email protected]_._