NEW YORK, Aug. 8 (UPI) -- U.S. stock indexes posted gains Friday morning, in spite of heavy losses reported by the Federal National Mortgage Association.

Government-sponsored Fannie Mae said its net loss was $2.3 billion in the second quarter. Fannie Mae shares dropped 12 percent as the company announced it would cut dividends to 5 cents a share, The Wall Street Journal reported.

But, oil prices fell $2.35 Friday to $117.67 per barrel, affording markets breathing room.

The Dow Jones industrial average headed up in midmorning trading, rising 61.15 points to 11,492.58, up 0.53 percent. The Nasdaq composite index rose 20.03 points, or 0.85 percent, to 2,375.76. The Standard and Poor's 500 rose 0.45 percent to 1,271.76, up 5.69 points.

The 10-year U.S. Treasury note rose 2/32 to yield 3.918 percent.

The euro traded at $1.5026 against Thursday's close of $1.5323, while the dollar traded at 110.02 yen from Thursday's 109.43 yen.

In Tokyo, the Nikkei average gained 43.42 points to 13,168.412, up 0.33 percent.

LONDON, Aug. 8 (UPI) -- Plentiful oil reserves underground won't prevent supply issues from pushing prices above $200 a barrel in the next five to 10 years, a British study group said.

A report issued by think tank Chatham House said governments and companies have failed to invest enough in expanding production to prevent a jump in prices, the British Broadcasting Corp. reported Friday.

Oil prices peaked at more than $145 per barrel in early July, but have fallen since to around $120 per barrel.

Future price jumps could be avoided only by a major recession (that) reduces demand - and even then such an outcome may only postpone the problem, said Paul Stevens, author of the report called, The Coming Oil Supply Crunch.

The report says the Organization of Petroleum Exporting Countries has fallen short on expansion goals since 2005 and that oil companies favor returning profits to shareholders over investing in future production, the BBC reported.

Stevens also said a resurgence of resource nationalism discourages new production by limiting options for international firms.

While the forecast is controversial and extremely bullish, even allowing for some increase in capacity over the next few years, a supply crunch appears likely around 2013, Stevens said.

WASHINGTON, Aug. 8 (UPI) -- Second-quarter U.S. productivity rose faster than labor costs, indicating a drop in labor cost pressure for non-farm business, the government said Friday.

On a seasonally adjusted annual rate, non-farm business productivity rose 2.2 percent in the quarter after a first-quarter gain of 2.6 percent. Unit labor costs rose 1.3 percent after rising 2.5 percent in the first quarter, the U.S. Bureau of Labor Statistics reported.

Analysts predicted productivity to rise 2.7 percent rate but labor costs grew as predicted.

Productivity declined 3.5 percent in durable goods manufacturing and rose 0.7 percent in nondurable goods production with an overall decline of 1.4 percent. The decline was attributed to decreased output and a decline in hours worked, which fell at an annual adjusted 0.5 percent, the report said.

It was the second consecutive quarter in which hours worked declined in the United States. In the first quarter, hours worked fell by an annual rate of 1.6 percent.

WASHINGTON, Aug. 8 (UPI) -- Brand name drug prices rose 7.4 percent in 2007 but some U.S. drug prices have jumped more than 1,000 percent, researchers said.

A University of Minnesota study found wholesale prices of 26 brand-name drugs doubled during one-time markups in 2007, USA Today reported Friday.

Some lesser-known drugs have made enormous price leaps. Questcor Pharmaceuticals raised the price for anti-spasm drug Acthar, prescribed to babies, from $1,650 to $23,000 a vial, last year, the report said.

Questcor's Web site said it did so after years of efforts to stay financially viable.

Others are suspicious. Some companies seem to figure no one is watching, Stephen Schondelmeyer, director of the PRIME Institute at the University of Minnesota, told the newspaper.

U.S. Sens. Amy Klobuchar, D-Minn., and Charles Schumer, D-N.Y., asked the Government Accountability Office to look into drug price hikes, the report said.

In April, Klobuchar asked the Federal Trade Commission to investigate Ovation Pharmaceuticals Inc., which raised prices 3,437 percent on four products in 2006, the newspaper reported.

Ovation said it needed to cover operating expenses. We feel we made an important investment in keeping these older products alive, said company spokeswoman Sally Benjamin Young.