US stocks tumble on oil worries
Another surge in oil prices sent US stocks plummeting today, with the Dow Jones industrial average shedding more than 160 points and the Nasdaq composite index and Standard & Poor’s 500 recording new lows for the year.
Investors reacted strongly to the oil hike, selling off rapidly as the afternoon progressed. A barrel of light crude closed at a record-high $44.41, up $1.58.
Over the past few weeks, drops in stock prices have corresponded almost directly to rising oil prices, which have climbed on terrorism fears. Today’s rise, attributed to Russian oil conglomerate Yukos’ ongoing troubles with the government there, prompted heavy selling in the last hour of trading.
The Dow fell 163.48, or 1.6%, to 9,963.03, closing below the 10,000 mark for the third time in the last 10 sessions. It was the blue chips’ second-largest slide of 2004 – it lost 168 points on March 11, when the markets turned sharply downward to end the rally that began a year earlier.
Broader stock indicators also fell sharply. The S&P 500 index dropped 17.93, or 1.6%, to 1,080.70, and the Nasdaq was down 33.43, or 1.8%, at 1,821.63.
It was the lowest close for the Nasdaq since September 30, and the lowest for the S&P 500 since December 17.
“We’ve had some good economic numbers, but with the high price of oil and the terror alert, there’s a lot of pressure on the market on a short-term basis,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. ”These oil prices will eat away at consumer confidence, consumer spending and start to affect business decision making.”
Oil prices dominated investors’ thoughts, causing them to ignore other news, both good and bad.
The Labour Department reported a drop of 11,000 first-time unemployment claims, and said the number of people who continue to receive benefits fell by 35,000 to 2.91 million – down from 3.62 million a year ago.
Many investors, however, were waiting to see what clues the jobs creation report would have about economic growth. Last month’s report fell markedly short of expectations.
Retail sales figures, another key barometer of economic health, failed to live up to expectations.
Major retailers announced mixed sales data today, with many apparel merchants issuing disappointing numbers. Companies including Wal-Mart Stores and Target had stronger sales in July that were mostly in line with expectations, but investors were hoping for better news. Wal-Mart fell 1.15 to 52.05, while Target skidded 1.37 to 41.76.
The concern on Wall Street is that the retail numbers reflect consumer distress over rising prices, particularly oil. Higher oil prices could cause inflation as retailers pass higher shipping costs to customers, and curtail consumer spending as Americans pay more for gas.
Goodyear Tyre & Rubber Co was up 5 cents at 10.90 after it swung to a profit in the second quarter on record tire sales. The company posted earnings of 14 cents per share, 6 cents better than analysts’ estimates.
Frontier Oil, like many energy companies, showed strong earnings thanks to this year’s rise in oil prices. Frontier beat expectations by 25 cents per share, but fell 1.19 to 19.35.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume totalled 1.03 billion shares, compared with 1.05 billion at the same point on Wednesday.
The Russell 2000 index of smaller companies was down 10.31, or 1.9%, at 532.36.
