Oil price rise sees US stocks down
Another surge in oil prices and a sharp drop in consumer spending rattled US investors today, sending stocks lower and hitting the technology sector particularly hard.
The market, already smarting from record high prices for oil, took another blow as US crude prices jumped above 44 a barrel for the first time.
The Dow Jones industrial average fell 58.92, or 0.6%, to 10,120.24. The decline halted the Dow’s longest winning streak since November, a five-session advance of 217 points that lifted the blue-chip measure back above 10,000.
Broad market indicators also dropped. The Nasdaq composite index fell 32.67, or 1.7%, to 1,859.42, while the Standard & Poor’s 500 index fell 6.93, or 0.6%, at 1,099.69.
As oil prices continued their climb, investors feared that consumers and businesses could face even higher fuel costs in coming months.
The contract for September deliver of light crude rose 33 cents to US$44.15 on the New York Mercantile Exchange, the third straight closing record.
On London’s International Petroleum Exchange, September Brent crude rose 67 cents to a new high of US$40.64.
Meanwhile, before the open on Wall Street, the Commerce Department reported that consumers slashed their spending in June by the largest amount in three years, reinforcing other recent indications that the economic recovery slowed at the end of the second quarter.
The report said consumer spending dropped by a sharp 0.7% in June from the previous month. In May, consumers had ratcheted up spending a strong 1%. Americans’ incomes rose 0.2% in June, weaker than the 0.6% increase the month before. Both numbers were weaker than analysts had expected.
Technology shares figured prominently among the Dow’s decliners, with International Business Machines falling 98 cents to US$85.71 and Intel falling 73 cents to US$24.17.
The Dow’s biggest decliner was Caterpillar Inc, down 1.42 at US$71.68.
Rising crude prices helped Exxon Mobil buck the trend, gaining 64 cents to US$46.89.
Shares in Martha Stewart Living Omnimedia Inc fell 15 cents to US$11.25 after the company - still struggling with the personal legal woes of its founder and former chairman - posted a wider-than-expected loss for the second quarter.
It also warned of bigger-than-expected losses in the third quarter. Martha Stewart Living posted a loss of US$19.29 million, or 39 cents per share, in the three months ended June 30 in contrast to a profit of US$931,000, or 2 cents per share, a year earlier.
Conglomerate Tyco International rose 17 cents to US$31.41 after the company said third-quarter profits surged 63% due to sharply lower production costs and double-digit revenue growth.
Moody’s fell 30 cents to US$69.64 after Morgan Stanley downgraded the rating agency’s shares to “equal weight” from “overweight”.
Declining issues outnumbered advancers by a 6-to-5 margin on the New York Stock Exchange, and by a 2-to-1 ratio on the Nasdaq stock market.
NYSE volume was moderate.
The Russell 2000 index of smaller companies fell 8.30, or 1.5%, to 543.63.
Overseas, Japan’s Nikkei stock average dropped 0.7%, the FTSE 100 rose 0.3%, France’s CAC-40 rose 0.8%, and Germany’s DAX index rose 0.4%.
