US stocks drop amid poor data and rising oil
A sharp rise in oil prices sent stocks sliding today as investors nervously eyed new data showing that high energy prices have started to slow the economy.
Profit-taking in the technology sector also weighed heavily on the markets.
Crude futures surged as refinery recovery remained sluggish on the Gulf Coast and the government announced a sharp drawdown in the nation’s oil reserves.
A barrel of light crude settled at 65.09 dollars, up 1.98 dollars on the New York Mercantile Exchange.
Wall Street also was concerned with nearly flat industrial output figures from the Federal Reserve – due to the approach of Hurricane Katrina – and a 2.1% drop in retail sales.
However, the Commerce Department noted that with car sales removed, other retail sales rose 1%, though much of that was due to a rise in petrol prices.
The market’s losses were magnified due to light trading volume, as many investors simply held off making large bets and hoped the Fed, which meets next Tuesday, could shed more light on the nation’s economic situation.
“There seems to be a lot of uncertainty about what the Fed is going to say,” said Scott Wren, equity strategist for A.G. Edwards & Sons.
“It seems a little early, given the meeting is next week, but I do think people are just waiting around for better news.”
According to preliminary calculations, the tech-focused Nasdaq composite index fell 22.42, or 1.03%, to 2,149.33.
Other stock indicators also moved lower. The Dow Jones industrial average dropped 52.54, or 0.5%, to 10,544.90, while the Standard & Poor’s 500 index slid 4.04, or 0.33%, to 1,227.16.
Bonds edged lower, with the yield on the 10-year Treasury note rising to 4.16% from 4.13% late on Tuesday. The US dollar was mixed against other major currencies in European trading. Gold prices were higher.
After a surprising runup in stock prices in the week after Hurricane Katrina, bolstered by data suggesting that the storm’s economic impact would be limited, investors have become tentative – especially as oil prices have started climbing once again.
“I think the market has managed the inevitable profit-taking very well, but there’s still a lot of skepticism out there,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisers.
“I think the market’s overall tone is positive, but there’s a very uneasy truce right now between the positives and negatives, and we’ll have to see how things shape up in the coming weeks.”
Declining issues outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange, where volume was 1.49 billion shares, down from 1.5 billion at the same point on Tuesday.
The Russell 2000 index of smaller companies fell 6.78, or 1.01%, to 666.35.
