U.S. stocks closed lower Monday after a sharp decline in China’s main stock index reignited worries that the six-month old rally defies logic and is built mostly on hype.  Yesterday’s 6.7% plunge in Shanghai Composite Index on concerns over tightening credit in that country sent stocks in Asia sharply lower and led to further selling in Europe.  Treasuries rose as investors shunned equities and turned towards safer bets.  Oil prices declined below $70 per barrel for the first time in almost a week on concerns about China’s growth prospects. 

The 30-stock Dow Jones industrial average shed 47.92 points, or 0.50%, to close at 9,496.28.  The broad Standard & Poor's 500-stock index was down 8.31 points, or 0.81%, at 1,020.62.  The tech-heavy Nasdaq composite index lost 19.71 points, or 0.97%, to 2,009.06.  Nevertheless, the Dow managed to end August up 3.5% for its fifth monthly gain in six months while

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Chinese stocks plummet, worldly markets follow… what’s behind today’s sell-off… Dan Denning on taking profits in the twilight of the U.S. stock rebound… India reports better-than-expected GDP growth… why our Mumbai partners are still hesitant… Another compelling argument against U.S. banks… Dan Amoss serves the cold, hard data… Plus, signs of the times: American’s vote to throw the bums out while the free market backlash hits Hollywood…

China has once again set the tone for our Monday market forecast. Roll the videotape:

Chinese traders dumped shares early this morning after a popular magazine rumored that the booming Chinese loan market is cooling off. Caijing magazine guessed that the Chinese loaned about $29 billion in August, a 43% crash from July. While that number isn’t official, traders around the red nation raced for the exits. The Shanghai Composite closed down 6.7%, its worst day in

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Earlier today, Baker Hughes, Inc. (BHI) and BJ Services (BJS) announced a definitive agreement for a stock and cash merger, which represents a transaction value of $5.5 billion for BJ Services based on closing stock prices on August 28, 2009. Post-merger, Baker Hughes shareholders will own approximately 72.5% of the combined entity, with BJ Services shareholders owning the rest. The Baker Hughes Board of Directors will be expanded to include two BJ Services Board members. In addition to saving significantly on costs, shareholders of both companies get a more diversified oilfield services exposure. BJ Services shareholders get exposure to the much more stable top-tier global oilfield services over and above its existing pressure pumping services. Baker Hughes shareholders will get open to more efficient oilfield services by integrating pressure pumping with the company’s wide range of products and services. Baker Hughes expects to realize annual ...

• A Barron's article advised taking profits in Citigroup (NYSE:C) shares after the recent spike in the company’s shares, instead advising JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) fundamentally stronger

• Baker Hughes (NYSE:BHI) announced plans to purchase rival BJ Services (NYSE:BJS) for $5.5 billion in a cash-and-stock deal to expand its international business

• Los Angeles-based Capital Group Companies has accumulated a 4.38% stake in UBS (NYSE:UBS) at an undisclosed price

• Huntsman Corp (NYSE:HUN) said it agreed to acquire certain assets of bankrupt Tronox (TRXAQ.PK) for $415 million

• Sun Microsystems (NASDAQ:JAVA) reported a fourth quarter loss of 20 cents a share, a 14 cent miss, on revenues of $2.6 billion versus $2.9 billion

Zacks Investment Research

Halliburton (HAL) enjoys a strong competitive position in the global oilfield services market. We like the company’s broad and technologically complex product and service offerings, along with its robust financial profile. Halliburton is among the top three players in each of its product/service category and is present in all major hydrocarbon-producing regions of the world.

The company has a strong international oilfield presence, with the oil-rich Eastern Hemisphere becoming its fastest growing segment. In fact, this region contributed largely to Halliburton’s better-than-expected second-quarter profit of 30 cents per share (above the Zacks Consensus Estimate of 27 cents). Its international operations have held up reasonably well in the downturn and are expected to provide some cushion to the company’s near-to-medium-term performance.

However, Halliburton’s overexposure to domestic natural gas prices remains a cause for concern. Being a global leader in the vital oilfield service, the company remains more vulnerable to

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SAP AG (SAP) reported total revenue of €2.58 billion, a decline of 10% year over year, for the second quarter of 2009. US GAAP basic earnings per share from continuing operations rose 6% to 36 pence. Software revenue fell 40% year over year due to difficult operating environment worldwide.

SAP closed major contracts in several key regions during the period, including Federal Interior Ministry of Rheinland-Pfalz, Germany, Group Danone, Shoosmiths and Statoil ASA in EMEA, Baker Hughes, Boston University and Confederação SICREDI in the Americas and China Export & Credit Insurance Co., Commonwealth Bank of Australia, Ministry of Finance, Singapore and Tata Teleservices Ltd in Asia Pacific Japan.

Quarterly operating income was €431 million, up 5% year over year, with a margin of 25.1%, an increase of 4.4 percentage points.

Operating cash flow from continuing operations was €1.83 billion, an increase of 34% year over year. Free cash

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Baker Hughes (BHI) reported second-quarter earnings of $0.41 per share, compared with the Zacks Consensus Estimate of $0.45 and a year-ago profit of $1.36 per share.

The significant year-over-year downfall in earnings was due to lower activity levels, severe contraction in customer spending and price deterioration. Including one-time items, Baker Hughes’s earnings were $0.28 per share versus $1.23 per share in the year-earlier quarter.

Segment Performance

Revenue from Baker Hughes’ Oilfield operations was $2.34 billion, down 22% year over year and 12% sequentially. Pre-tax operating profit fell nearly 65% year over year and more than 37% sequentially to $239 million. Pre-tax operating margin for the quarter was 10%, compared to 23% in the year-ago period and 14% in the previous quarter.

Revenue from the Drilling and Evaluation segment decreased 27% year over year and 14% sequentially to $1.12 billion. The segment’s pre-tax operating profit was down 80% year

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• Kraft (NYSE:KFT) posted second-quarter results 2 cents above projections at 56 cents, as revenues fell 5.9% from a year ago to $10.16 billion, off estimates of $10.37 billion. For the year, the firm issued in-line guidance of $1.93, up from its prior view of $1.88

• Procter & Gamble (NYSE:PG), whose results were feared likely to show a negative impact from declining consumer spending, reported a one cent better than estimated fourth quarter earnings of 80 cents a share; however, revenues of $18.66 billion were below Street estimates of $19.32 billion.  Fiscal 2010 guidance was issued of $3.65 to $3.80 a share, compared with Street projections of $3.76 a share

• Dean Foods (NYSE:DF) reported inline returns of 43 cents a share on revenues of $2.7 billion, versus estimates of $2.8 billion

• Sony (NYSE:SNE) announced plans for a new e-reader at a low price point of $199 in the US, aimed

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Do you remember this time last year? As spring turned to summer, energy prices were moving upward. By mid-July 2008, oil prices peaked at $147 per barrel. But as with Gen. Pickett and his famous charge at Gettysburg, that lofty level of $147 was the high-water mark for oil prices.

By August of last year, the price of oil was retreating, and it was a hard slog on the way down. By midwinter, in December 2008 and January 2009, oil prices were in the $30s per barrel - a drop of over 75% within six months. It was a wild ride.

Natural gas had a similar rise and fall last year. In July 2008, the NYMEX price for natural gas was around $13 per mcf (thousand cubic feet). By October 2008, that price was cut in half. In fact, natural gas prices trended down throughout the chilly winter of 2008-2009. The current

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divBaker Hughes put out its rig count again last week, and I'm just updating with the data. The natural gas count slipped to 7-year lows, as producers continue to shut off supply (a href="http://www.reuters.com/article/rbssOilRelatedServicesEquipment/idUSN1749518220090717"data via Reuters/a).br /br /br /blockquote-The number of rigs drilling for natural gas in the United States fell 7 this week to 665, the lowest level in more than seven years, according to a report on Friday by oil services firm Baker Hughes in Houston.br /br /-U.S. natural gas drilling rigs have been in a mostly steady decline since peaking above 1,600 in September, and now stand at 869 rigs, or 57 percent, below the same week last year. It is the lowest natural gas rig count since May 3, 2002, when there were 640 rigs operating.br /br /-Tighter access to credit and a 70 percent slide in natural gas prices to about $3.50 per mmBtu ...