Surging Oil Prices Put a Halt to Stock Rally
Stocks retreated Wednesday from three-year highs as oil prices vaulted back above $43 a barrel and China said it would limit airliner purchases, denting shares in Boeing and other aerospace companies.
The price of crude oil jumped $1.87 a barrel to $43.64 in New York futures trading, after car bombs exploded in Saudi Arabia’s capital and the U.S. government reported another drop in heating-fuel stockpiles for the winter.
“We got the reports of explosions in Saudi Arabia, and that -- on top of the drawdown in oil inventories -- saw a big jump in oil prices,” said John Caldwell, chief investment strategist at McDonald Financial Group. “That took a bit of the wind out of the sails of the market.”
The Dow Jones industrial average lost 25.35 points, or 0.2%, to 10,829.19. The Standard & Poor’s 500 index dipped just 0.09 point to 1,213.45. The technology-laden Nasdaq composite inched down 0.19 point to 2,177.00.
Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange, although losers had a modest edge on Nasdaq.
The lackluster session came a day after all three indexes hit fresh three-year highs. Trading remained light, with desks sparsely populated as many traders were away between the Christmas and New Year holidays.
U.S. Treasury yields rose after an auction of $24 billion in new two-year notes drew relatively scant demand in the holiday-thinned market. In particular, traders pointed to lack of interest from indirect bidders, which include foreign central banks. They picked up just $7.9 billion, or 33% of the whole issue, down from the 42% in the November auction.
That was their lowest showing for a two-year auction this year and a possible sign that foreign banks are becoming more reluctant to finance U.S. debt.
The new notes went at a yield of 3.12%, the highest for such a sale since May 2002.
The yield on the 10-year note, a benchmark for home mortgages, rose to 4.32% from 4.29%.
In other markets highlights:
* The dollar, which has been weighed down by worries over the ballooning U.S. trade and budget deficits, strengthened slightly against the euro and the yen. The euro traded at $1.360, down from $1.361 on Tuesday, while the dollar rose to 103.83 yen, up from 103.03 yen.
* Boeing slid $1.18 to $52.07, after a Chinese official said his country would limit deliveries of new commercial aircraft next year. China has been making efforts to keep its economy from overheating.
United Technologies, which makes engines for Boeing, lost 78 cents to $103.96. General Electric, the world’s biggest maker of aircraft engines, declined 13 cents to $36.56.
* Lockheed Martin, the No. 1 U.S. defense company, fell $1.51 to $55.25 on concern that the government might cut production of the company’s F/A-22 stealth fighter-bomber. The S&P; 500 aerospace and defense index, which includes Boeing, United Technologies and Lockheed, dropped 1.6%. Century City-based Northrop Grumman, the third-largest U.S. defense contractor, slid $1.45 to $54.62.
* Gains in energy stocks kept the S&P; 500 from falling further. ChevronTexaco of San Ramon, Calif., rose 49 cents to $52.93 and Los Angeles-based Occidental Petroleum added 32 cents to $58.44. BJ Services, an oilfield contractor, rose 86 cents to $47.02.
* Texas Instruments led a mild rally in semiconductor shares after a Credit Suisse First Boston analyst said it was among the companies best positioned to benefit from the release of consumer products such as digital televisions in 2005. Shares of the No. 1 maker of mobile-phone processors added 43 cents to $24.33. Among other chip makers, Irvine’s Broadcom rose 43 cents to $32.38, Xilinx climbed 14 cents to $29.65 and Advanced Micro Devices advanced 23 cents to $21.96.
* Oracle said it had obtained shareholder control over PeopleSoft, with 75% of the latter company’s outstanding shares tendered to Oracle. Oracle’s takeover is expected to close in January. Oracle slipped 12 cents to $13.72, while PeopleSoft gained 8 cents to $26.48.
* Biotech company Genzyme rose 63 cents to $58.16 after the Food and Drug Administration gave its approval to the company’s leukemia drug Clolar, aimed at treating children in whom previous leukemia treatments have failed.
* Orange County’s Wet Seal was up a penny at $2.10 after the struggling teen-focused retailer said it would close 150 stores and cut 2,000 jobs.
