Blue Chips Skid on Hike in Oil Prices
Blue-chip stocks ended sharply lower Monday as soaring crude oil prices revived jitters over inflation, derailing the bull market after last week’s dizzying rise.
The Dow Jones industrial average lost 90.18 points, or 1.01%, to 8,816.25. It was the first time in a week that the Dow did not end at a record high. It had closed Friday above 8,900 for the first time.
In the broader market, declining issues led advances 1,586 to 1,397 on active volume of 629 million shares on the New York Stock Exchange.
Bonds were little changed, recovering from early losses, as the surge in oil prices barely nudged investor optimism for tame inflation. The yield on the benchmark 30-year Treasury bond edged up to 5.89% from 5.88% Friday.
The oil-price-sensitive Dow transportation index plunged 79.98 points, or 2.23%, to 3,506.94.
But the Nasdaq composite index, which is laced with technology stocks, rose 3.35 points, or 0.19%, to 1,792.51.
“This market was set up not to do well here today with the reversal of Friday’s action and higher oil prices,” said Richard Cripps, chief market strategist at Legg Mason Wood Walker.
“But it just continues to isolate negatives and not let them spill over into broader investment issues,” he said.
Oil prices jumped $1.90 to $16.51 a barrel on the New York Mercantile Exchange, roaring back from last week’s slide below $13--a nine-year low--after leading oil exporters said they will reduce production in order to boost sagging prices.
Stocks of major oil companies rallied on the news, but those of fuel consumers, including airlines, slumped.
Ralph Acampora, director of technical research at Prudential Securities, said the stock market could see some near-term softness because of rising oil prices, weak transportation stocks and political uncertainty in Russia.
“But this would be a buying opportunity,” Acampora said.
The recovery in oil triggered a rally in oil stocks, which dominated trading on the Big Board. Drilling-services provider Halliburton gained $3.63 to $51.75 and Schlumberger added $4.69 to $78.25.
Among oil stocks, Exxon gained $1.31 to $68.63 and Texaco rose 44 cents to $61.69. Mobil rose 81 cents to $79.38.
On the other side of the coin were airline shares. Delta Air Lines lost $2.69 to $115.75 while US Airways fell $2.56 to $70.88.
The Standard & Poor’s composite index of 500 stocks was off 3.61 points, or 0.33%, at 1,095.55. The American Stock Exchange rose 7.48 points, or 1.03%, to 735.27.
The NYSE composite index fell 2.07 points, or 0.36%, to 570.54. The average share was down 18 cents.
Among market highlights:
* Networking, telecommunications and software companies got a boost when Morgan Stanley, Dean Witter analyst Alkesh Shah raised his earnings estimates for Lucent Technologies, citing a “belief that overall telecom equipment demand should not only continue, but accelerate” over the next few quarters. Lucent rose $3.81 to $124. 3Com rose $1.94 to $35.13. Novell rose 56 cents to $10.63.
* Caterpillar rose 19 cents to $56.25 after the United Auto Workers union approved a six-year contract with the heavy-construction equipment maker.
* Compaq Computer rose $1.69 to $24.94 after the computer maker’s $8.35-billion acquisition of Digital Equipment won approval from the European Commission, clearing one regulatory hurdle. Digital Equipment rose $2.25 to $50.19.
* Integrated Circuit Systems dropped $3.31 to $20.13 after the chip maker said Stavro Prodromou resigned as chief executive, president and director.
Overseas, Tokyo’s Nikkei stock average rose 0.2%, Frankfurt’s DAX index fell 0.6% and London’s FTSE-100 was down 0.2%.
