Stocks Stumble on the Rising Cost of Energy
A rebound in oil prices trumped positive earnings news Wednesday, sending stocks skidding.
A quarterly earnings report from chip bellwether Intel, released after the market closed Tuesday, and an upbeat earnings preview from McDonald’s cheered Wall Street early in the session. But rising crude prices squashed those gains as oil traders nervously handicapped weekly inventory numbers due today.
Anticipation of today’s report on weekly jobless benefit claims also spooked buyers -- particularly after disappointing employment data for September released Friday. That, combined with surging energy costs and worries about decelerating earnings, contributed to an apprehensive climate on Wall Street.
“There is so much uncertainty in the market right now, and it is playing itself out as fear: the fear of being overcommitted to stocks,” said Ken Tower, chief market strategist for Schwab’s CyberTrader.
The Dow Jones industrial average slumped 74.85 points, or 0.7%, to 10,002.33, though it pulled up from a low of 9,957.
Broader indexes also fell. The Standard & Poor’s 500 declined 8.19 points, or 0.7%, to 1,113.65. The Nasdaq composite shed 4.64 points, or 0.2%, to 1,920.53, propped up somewhat by strength in semiconductor shares.
About two stocks fell for every one that rose on the New York Stock Exchange.
Crude oil futures opened lower after sliding $1.13 a barrel Tuesday, raising hopes for a better economic picture by year’s end. But as oil traders became less bullish about U.S. crude inventories and worries grew about Hurricane Ivan’s lingering effect on production in the Gulf of Mexico, prices began to soar. Oil for November delivery surged $1.13 to settle at $53.64 a barrel in New York, matching Monday’s record-high close.
Even as oil rallied, however, energy shares and many other commodity-related stocks tumbled as some investors took profits. Many of the stocks have zoomed in recent months.
In the energy sector, Exxon Mobil closed down 89 cents at $48.48, ChevronTexaco shed $1.16 to $53.31 and Occidental Petroleum lost $2.04 to $54.91.
Mining, steel, chemical and other commodity issues also plunged.
In other market highlights:
* U.S. Treasury yields fell as crude oil prices jumped late in the day, keeping the focus on a possible slowdown in economic growth. The yield on the benchmark 10-year note dropped to 4.07% from 4.10% on Tuesday.
* Intel, the biggest semiconductor maker, climbed 71 cents to $20.99. The company said it was trimming stockpiles, easing concern that computer demand would slump through the end of the year. Intel said its sales in the current quarter might climb to a record $9.2 billion.
Broadcom gained $1.27 to $29.59, National Semiconductor rose 46 cents to $15.69 and Texas Instruments was up 43 cents to $21.73. Applied Materials, the largest maker of semiconductor production equipment, added 23 cents to $16.39.
* Yahoo, which owns the No. 2 Internet search engine, jumped 73 cents to $34.96. The company forecast 2004 operating income that exceeded its July estimate. Ask Jeeves gained $1.61 to $33.95, and Google, the top Internet search engine, added $3.50 to a record $140.90.
“This market is still going to grow tremendously, and the leaders are going to benefit,” said Alan Loewenstein, who helps manage the John Hancock Technology Fund in Boston.
* McDonald’s climbed $1.31 to $28.86. Its 4.8% jump was the largest in the Dow average. In an earnings preview, the restaurant chain said third-quarter profit was about 61 cents a share on higher U.S. sales. After excluding a tax benefit, the company’s estimate would be 5 cents more than what analysts had projected.
* Harley-Davidson slipped $1.02 to $58.72 after saying third-quarter sales at dealerships fell 9.8% from a record a year earlier. Hurricanes in the southeastern U.S. slowed sales, the company said.
* Jones Apparel Group, the maker of Jones New York clothing, shed $2.73 to $33.57 after third-quarter earnings fell short of its forecast and the company reduced its 2004 profit estimate. Jones Apparel expects 2004 per-share earnings of $2.49 to $2.56, less than its earlier prediction of as much as $2.76.
