Stocks Slide Despite Oil Price Drop
Oil prices sank to a four-month low Tuesday, but stocks slumped amid uncertainty over growth prospects in the technology sector.
The dollar fell against the euro, and U.S. Treasury notes were little changed.
Analysts said the lackluster trading on Wall Street was characteristic of the first part of December, when a lull often precedes an end-of-year rally. But there’s no guarantee the market will benefit from the so-called Santa Claus effect this year because stocks already have posted a significant advance over the last two months.
Wall Street “needs something to boost things along,” said Larry Wachtel, market analyst at Wachovia Securities.
“There’s nothing in the way of dramatic elements to drive you forward,” Wachtel said. “I don’t see a lot of selling pressure. I don’t see a reason for the market to dump. But I just don’t see anything to drive it dramatically forward.”
The Dow Jones industrial average slid 106.48 points, or 1%, to 10,440.58.
The broader gauges also skidded lower. The Standard & Poor’s 500 index shed 13.18 points, or 1.1%, to 1,177.07. Nasdaq was down 36.59 points, or 1.7%, at 2,114.66.
Decliners outnumbered advancing issues by more than 4 to 1 on the New York Stock Exchange.
Traders weren’t overly concerned by the slide in equities, predicting that if oil continued to decline, buyers would return to Wall Street.
In addition, with many professional investors such as mutual fund managers logging gains for the year, there’s less threat of a more significant sell-off.
The Labor Department reported Tuesday that worker productivity grew at a 1.8% annual rate in the third quarter, the slowest pace in nearly two years. The latest snapshot of productivity -- the amount an employee produces for every hour of work -- showed less growth than previously thought, and marked a sharp pullback from the 3.9% pace logged in the second quarter.
In other markets highlights:
* The price of a barrel of crude oil fell $1.52 to $41.46 in New York trading. The drop came despite supply fears prompted by Monday’s attack on a U.S. consulate in Saudi Arabia and unrest in Nigeria. Traders chalked up some of the decline to mild winter weather in the Northeast, sapping demand for heating oil. The price of crude is down 26% from a record of $55.67 on Oct. 25.
* The dollar sank amid continuing concerns over the U.S. trade and budget deficits. The euro closed at $1.343 in late New York trading, up from $1.342 on Monday. European finance ministers have voiced angst over the euro’s rise but U.S. officials have not, leaving traders no reason to reverse the trend.
Many analysts believe the United States is content to let the dollar fall because the decline has been making American exports cheaper.
* U.S. Treasury prices treaded water as traders focused on a possible Federal Reserve boost in short-term interest rates next week and the government’s sale of $24 billion of five- and 10-year debt starting today. The yield on the benchmark 10-year note was unchanged at 4.22%
* Cisco and Intel led a retreat in tech stocks. Cisco fell 9 cents to $19.73, erasing a 2.7% advance earlier in the session, after management failed to address the current quarter’s growth prospects at a meeting with analysts. Intel, which also rose early, closed down 53 cents at $23.48.
“Investors are giving a sort of lackluster appraisal of tech spending going into ‘05,” said Art Hogan, chief market analyst at Jefferies & Co. in Boston. “Many people are taking advantage of the run” in stocks this quarter to lock in returns.
Hewlett-Packard slid 25 cents to $21.08 after Chief Executive Carly Fiorina declined to discuss sales forecasts for fiscal 2005 at an analyst conference. The company did not repeat or confirm its November forecast for profit.
* Johnson & Johnson sagged $1.42 to $60.41 on a New York Times report that the drug and healthcare products company was in advanced talks to buy Guidant Corp., a leading maker of devices to treat heart and circulatory illnesses. Guidant surged $3.60 to $72.35 on the news.
* Colgate-Palmolive soared $3.78 to $50.07 after the maker of consumer products such as Ajax detergent, Irish Spring soap and Hill’s Science Diet pet foods announced plans to cut its worldwide workforce by about 12% and close one-third of its factories as part of a four-year plan to boost sales and profit.
