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A renewed rise in crude oil price on Wednesday siphoned the energy out of the U.S. stock and bond markets, reminding traders that high oil and gasoline prices could drag on economic growth and ultimately push inflation to the forefront again. Still, mortgage rates managed to edge back off as products re-adjusted from Tuesday's elevated levels.

Light sweet crude oil futures for September delivery popped up above $65 a barrel to another new record intraday peak, lifted partly by continuing supply concerns pinned to tensions in the Middle East. News that oil inventories expanded more than expected had only briefly tipped oil futures from the day's loftiest levels.

The day after the Federal Reserve matched market expectations and lifted short-term interest rates by another 25 basis points, prices of Treasury securities advanced early but then eroded gains as crude oil rose. That turnaround left yields, which move opposite of prices, near Tuesday's closing levels. Similarly, a morning rally in key stock indexes stalled, and by day's close many stock gauges had back-pedaled into the red.

Wednesday's activity lacked much direction from the skimpy slate of fresh economic data. The market showed muted response to news that the U.S. budget deficit narrowed in July to $52.79 billion as government revenues grew. Traders had expected a $58-billion deficit.

The bond market, however, did pull back from a morning advance on some disappointment that the Treasury Dept.'s auction of $13 billion in 5-year notes drew only mixed demand, including less overseas participation than anticipated.

In stocks, most key indexes ended in negative territory after erasing morning strength. Insurer American International Group bucked the trend and gained ground, ending up $0.86 or 1.40 percent at $62.28 on better-than-expected earnings. Crude oil's rise lifted oils stocks as well, including Exxon Mobil Corp., which rose $0.73 or 1.23 percent to ended at $59.90.

Technology shares lost ground on Wednesday, paced by a 6.94-percent drop in Cisco Systems Inc. Cisco shares ended down $1.36 at $18.25 Wednesday after reporting a revenue forecast late Tuesday that fell short of analysts' expectations.

At Closing:

The Dow 30 Industrial Index fell 21.26 points (-0.20 percent) to 10,594.41; the Standard & Poor's 500 index dipped 2.25 points (-0.18 percent) to 1,229.13, and the Nasdaq Composite index dropped 16.38 points (-0.75 percent) to 2,157.81.

The 30-year Treasury bond was off 4/32 with the yield at 4.57 percent, unchanged from Tuesday's close.

The 10-year Treasury noted dipped 2/32 to yield 4.39 percent, also unchanged from Tuesday's close.

The 5-year Treasury note edged down 1/32 to yield 4.23 percent, unchanged versus Tuesday's close.

At 4 p.m. CDT, average mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was at 5.724 percent from 5.77 percent at Tuesday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.323 percent from 5.375 percent at Tuesday's close.

Coming Up:

Thursday's economic report schedule features July U.S. retail sales, expected to rise 2.0 percent. But excluding autos, sales are forecast gaining 0.6 percent. Weekly initial jobless claims for the week ended August 6 are seen firming to 315,000.

Wednesday's flat closing market levels in Treasuries likely means mortgage product rates overnight also can continue to hover near Wednesday's late-afternoon levels.

Laura Jacobsljacobs@interest.com0

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