STOCKS : Rising Oil Prices Cause 31.93 Drop in the Dow
Stocks fell broadly Thursday as renewed concern over the Persian Gulf crisis sent crude oil prices surging back above the $30-a-barrel mark.
The Dow Jones industrial index fell 31.93 points, or 1.2%, to 2,596.29. New York Stock Exchange volume remained light at 125.6 million shares, compared to 120.6 million Wednesday.
In the broader market, declining issues outnumbered advances by more than 9 to 5 in nationwide trading of NYSE-listed stocks, with 511 up, 960 down and 490 unchanged.
Worry over the Mideast was rekindled by word that an Iraqi soldier shot and wounded an American in Kuwait. The news sent crude oil for October delivery up $1.66, or 5.6%, to $31.43 a barrel on the New York Mercantile Exchange. It was the highest close since Aug. 23--the same day the Dow reached its August low of 2,483.
An ebb in the oil price rally last week helped stocks recoup some ground. But crude oil has made a strong turn upward this week.
At the same time, fresh signs of economic weakness have begun to overshadow hopes for a Federal Reserve move to lower interest rates. Major retailers Thursday reported that sales were sluggish last month, adding to worries about a potential recession.
“Retailers are coming into the most important part of the year--Christmas--and with consumer confidence at a low point and the possibility of recession lingering, consumers may be very tight with their pocketbooks,” said Jack Barbanel, president of First Global Asset Management.
In addition, investors are nervous ahead of today’s report on employment, which could show enough weakness in the economy to spur the Fed to act.
Even if interest rates fall, the prospect of deteriorating corporate profits is proving worrisome for the market.
Among market highlights:
* Motorola plunged 7 7/8 to 61 1/2, as analysts lowered earnings estimates. Other tech stocks also fell, including Texas Instruments, off 1 1/8 to 26 1/4, Honeywell, off 3 1/2 to 94 3/8, and Intel, off 1 1/4 to 31 1/4. The group has been hit hard of late on economic worries.
* The over-the-counter market suffered less than the Dow. The NASDAQ OTC composite index fell 3.66 to 378.78, a 1% drop, compared to the Dow’s 1.2%.
* Industrial stocks were big losers on renewed recession fears. GM dropped 7/8 to 37 3/8, Du Pont fell 1 to 35 1/2, Deere lost 1 3/4 to 56 and Ingersoll Rand dipped 1 1/8 to 43 1/8. Prudential-Bache cut auto-maker earnings estimates, citing the Mideast crisis.
* Worries about retail sales in light of a weak August performance hurt many retailers. Limited lost 1 1/8 to 15 5/8, Wal-Mart fell 1 to 27 3/8, Toys R Us slipped 3/4 to 23 3/4 and May Department Stores lost 1/2 to 45 1/4.
* Oil stocks rallied early, then faded. Mobil added 1/2 to 66 1/4, and Oryx gained 1 1/4 to 53 1/2, but Arco closed flat at 138 3/4 after trading as high as 141 1/4, and Unocal slipped 1/4 to 33 1/4.
Shares on the London Stock Exchange finished sharply lower amid Mideast concerns and Wall Street weakness, dealers said. The Financial Times 100-share index closed off 31.3 at 2,120.9, the day’s low.
Share prices closed mixed in Frankfurt, West Germany, in thin trading. The DAX index of 30 leading blue chips ended 7.15 points lower at 1,557.12.
CREDIT Bonds End Mixed on Jobs Optimism The Treasury’s benchmark 30-year bond rose 5/32 point, or about $1.56 per $1,000 face amount. Its yield, which declines as the bond’s price rises, edged down to 8.95% from late Wednesday’s 8.96%.
The federal funds rate, the interest rate banks charge each other on overnight loans, was 8.125%, down from 10% late Wednesday, when the rate surged on technical factors.
CURRENCY Dollar Off as Fed’s Intentions Debated The dollar finished mostly lower in thin trading on the world’s currency markets as speculation mounted over whether the Federal Reserve is poised to nudge interest rates lower.
It took its biggest hit against the Japanese yen, falling to an 11-month low, and gave up significant ground against the British pound.
The dollar bought 1.554 German marks late Thursday in New York, down from 1.558 late Wednesday. It fell to 140.70 yen from 141.85.
The pound, meanwhile, was bolstered by anticipation that Britain will join the European exchange rate mechanism during a meeting of European finance ministers in Rome this weekend. The mechanism establishes currency rates for a basket of European Community countries.
In London, the British pound rose to $1.9075 from $1.8990 late Wednesday. In New York, it cost $1.9125 to buy 1 pound, more expensive than Wednesday’s $1.9055.
COMMODITIES Gold Up on Anxiety About the Economy Gold neared $390 an ounce, the third straight day of rising prices, as the market continued its recovery from last week’s collapse.
But unlike last month’s explosive rally, analysts said, gold’s strength appeared to reflect investor concerns about the economy rather than knee-jerk reactions to Persian Gulf developments.
Gold futures settled $3.20 to $3.60 higher on New York’s Commodity Exchange, with the contract for spot delivery up $3.60 at $389.70 an ounce. The heavily traded December contract settled at $396.20.
Silver for September reached $4.77 an ounce, up 4 cents.
Spot gold has climbed $7.40 an ounce this week after plunging $32.70 last week amid perceptions that the U.S.-Iraq confrontation was cooling down.
Market Roundup, D6
