U.S. AVERAGES

Bond prices climbed as the Treasury Department announced the return of the 30-year bond, to be issued after a five-year interval. The yield on the benchmark 10-year Treasury note dropped to 4.30% vs. 4.34% late Tuesday.

Investors also were disappointed with the latest reading of the Institute for Supply Management's services index. The ISM index, which measures growth in the service sector of the economy, fell to 60.5 in July, lower than the 61 reading expected by economists and down from 62.2 in June.

Rising oil ahead of fuel inventory report weighed on stocks and dragged them off their 4-year highs hit Tuesday. As many as 21 named storms and 11 hurricanes are forecast for the 2005 hurricane season, matching a record set in 1933, according to U.S. government forecasters.

The euro surged versus the dollar on speculation that Middle Eastern oil producers were shifting revenue away from dollars.

On the earnings front, shares of Time Warner Inc. (TWX: chart) fell 2.1% to $17.05 after the media giant posted a 2Q loss of $321 million as it set aside $3 billion to cover legal reserves for a settlement.

The gold sector is currently up about 2.2%. The utility segment is among the best performers in the early session, extending Tuesday's gain with the report of PG&E's earnings, fueling the advance.

The airline sector is among the worst performers on the day, down about 1.7%. The housing segment is also weak.

Abatix (ABIX: chart) leads the advancers in the early dealings after it posted a profit for the second quarter vs. a loss last year. The company’s stock is currently up nearly 60%.

Overland Storage (OVRL: chart) is a significant decliner following the news that HP has decided not to buy the firm's next-generation mid-range tape automation product line. The stock is currently down 21%.

ECONOMIC NEWS

The Department of Energy's Energy Information Administration said that crude oil inventories rose by 200,000 barrels for the week ended July 29, advancing to 318.0 million barrels vs. the 317.8 million barrels the previous week.

Gasoline inventories posted a week-over-week drop of 4 million barrels. Stocks of distillate fuel oil rose by 1.5 million barrels.

According to the report from the Institute for Supply Management business activity in the service sector saw continued growth in the month of July, although the pace of growth slowed more than economists had estimated. The report also marked a sharp increase in prices that may result in to some inflation worries.

The ISM’s index of business activity in the service sector fell to 60.5 in July from 62.2 in June. Economists had expected a decline to 61.5.

The drop in the pace of business activity growth comes in spite of continued improvement in new orders, with the new orders index advancing to 61.9 in July vs. 59.5 in June. The backlog of orders index also grew to 53.5 in July versus 52.5 in June.

The pace of employment growth in the service sector slowed, with the employment index falling to 56.2 in July from 57.4 in June.

Prices saw a sharp rise in July, with the prices index climbing to 70.3 vs. 59.8 in June.

Mortgage application volume declined in the most recent week, according to industry report released Wednesday, with a rise in purchase activity not quite overcoming a fall in refinancing.

The Mortgage Bankers Association reported that its market composite index of mortgage loan application volume declined 0.3% for the week ended July 29. The 4-week moving average for the market index, which flattens out week-to-week volatility, slid 3.2% The index of purchase activity advanced by 1.9%, while the index of refinancing activity declined by 3%. The refinance share of total applications dropped to 41.7% versus 42.9% in the previous week.

INTERNATIONAL MARKET NEWS

European stocks ended mixed after several days of gains on mixed earnings news from several important companies, but upbeat news, provided by activity in mergers and acquisitions with Adidas-Solomon and Atlanta in the focus. Averages in Germany dropped 0.2%, in France lost 0.2%, and in the U.K. fell 0.01%.