Oil price worries hit US stocks again
The bears returned to Wall Street today, sending stocks lower as oil prices rose, a downbeat outlook from Cisco Systems weighed on technology shares and investors started having second thoughts about this week’s interest rate hike.
A sales warning from National Semiconductor, which was downgraded by brokerage firm Smith Barney, added to the pressure on the technology sector.
The sell-off erased much of the gains the Nasdaq composite index had the previous session, and led the rest of the market lower.
Volatility in oil prices, spurred by concerns about tightening supply, also contributed to the decline.
Crude futures fell after Saudi Arabia signalled it could raise its production output if necessary, but resumed their climb later in the session.
“We keep coming back to the same concern: crude oil prices,” said Ken Tower, chief market strategist for Schwab’s CyberTrader.
“Until there is some sign that crude oil is starting to come down ... and stabilise, I think everybody is going to remain very uncertain about how much of a slowdown in growth we will have.”
The Dow Jones industrial average closed down 6.35, or 0.1%, at 9,938.32, well off its lows of the day.
The broader gauges also rebounded somewhat, but remained in negative territory. The tech-dominated Nasdaq fell 26.28, or 1.4%, to 1,782.42. The Standard & Poor’s 500 index shed 3.25, or 0.3%, to 1,075.79.
Investors had a muted reaction to Tuesday’s much-anticipated rate hike, which brings the federal funds rate to 1.5%, focusing instead on the Federal Reserve’s upbeat assessment of the economy.
The Fed’s Open Market Committee blamed much of the recent slowdown on high energy prices, and said the economy was poised to improve.
The suggestion that more rate hikes lie ahead gave Wall Street some pause, however. Most analysts agree that the market’s underlying fundamentals remain strong, but a long list of unknowns continue to worry investors.
“We feel good about the broader economy, on the back of the Fed release ... and are confident going forward. And corporate earnings are all solid,” said David Hegarty, head trader at Commerzbank Securities.
“But there are a number of things that are just keeping the pressure on us: energy, terrorism, increasing interest rates and a tight presidential race.”
Cisco’s after session report on Tuesday did little to quell fears about the second half of the year. The networking company beat earnings expectations, but its cautious outlook on corporate technology spending rattled investors, and several brokerage firms downgraded the stock.
National Semiconductor sank 14% after it said revenues for the current period were likely to miss forecasts due to a drop-off in orders. Its remarks raised alarm among analysts about prospects for the chip sector.
Walt Disney was also down despite reporting earnings that beat expectations, with a jump in profits on higher theme park attendance and growth in its cable networks.
Former board member Roy Disney, who resigned last year in a bid to oust chief executive Michael Eisner, questioned the prospect for future growth, however.
Declining issues outnumbered advancers by about three to two on the New York Stock Exchange. Volume was light.
The Russell 2000 index, which tracks smaller company stocks, was down 3.20, or 0.6%, at 526.63.
