Stocks Fall as Oil Jumps
Major stock market indexes on Thursday suffered steep declines as a fresh surge in energy prices and a disappointing forecast from General Motors were too much for already jittery investors to handle.
The Treasury bond market rallied, driving long-term yields sharply lower.
On Wall Street, the Dow Jones industrial average slid 111.95 points, or 1.1%, to 10,505.83.
The broader Standard & Poor’s 500 index fell 10.25 points, or 0.9%, to 1,177.45, and the Nasdaq composite lost 21.97 points, or 1.1%, to 2,070.56.
In a pattern that has become familiar in the new year, the market traded modestly in the red for most of the session, then tumbled in the final 90 minutes.
Oil prices spooked investors as near-term futures in New York jumped $1.67 to $48.04 a barrel, the highest since Nov. 30.
Colder weather in the Eastern U.S. is expected to boost demand for heating oil and natural gas, analysts said.
Although oil prices have pulled back from a record high of $55 a barrel in October, supply concerns have resurfaced in recent weeks. U.S. heating oil inventories are 7% below their level of a year ago.
Concerns also have risen about possible interruptions in the flow of oil from Iraq as insurgents continue to hit U.S. and Iraqi forces ahead of the nation’s Jan. 30 elections.
“The attacks in Iraq will build to a fever pitch before the election,” said Michael Fitzpatrick, vice president of energy-risk management at Fimat USA in New York.
The stock market mostly has been in profit-taking mode since the turn of the calendar after rallying in November and December.
Rising energy prices are another excuse for investors to step away from stocks, analysts said.
“People’s psychology is, ‘Why would I buy now when I can sit back and let the dust settle and get a hold of what 2005 will do?’ ” Bart Barnett, head of trading at Morgan Keegan & Co. in Memphis, Tenn., told Bloomberg News.
The market’s losses accelerated late in the session after GM predicted it would earn $4 to $5 a share this year. Analysts had expected $4.78. The outlook was disappointing given GM’s projected earnings of $6 to $6.50 for 2004, excluding one-time items.
GM shares fell $1.07 to $37.32, nearing the 52-week low of $37.04 reached Oct. 25.
Stock prices have been back and forth in recent days amid the first wave of fourth-quarter earnings reports. The market had rallied Wednesday after an upbeat report from computer chip leader Intel.
Apple Computer soared $4.34 to $69.80 on Thursday after it reported late Wednesday that quarterly profit more than quadrupled. But Apple’s gains weren’t enough to lift the rest of the tech sector. On Nasdaq, falling stocks outnumbered winners by more than 3 to 2.
Breadth wasn’t as negative on the New York Stock Exchange: Losers topped winners by a relatively narrow margin.
And indexes of smaller stocks posted only minor losses. They had led the market’s slide since the start of the year.
The Russell 2,000 small-stock index eased 0.5% for the day.
This year, the Russell is down 6.4%, the Dow is down 2.6%, the S&P; 500 is off 2.8% and Nasdaq has fallen 4.8%.
“We did have a very strong November and December, so I think an overall pause in the market here in January shouldn’t be unexpected,” said Christopher Wiles, who helps oversee $4.5 billion at National City Investment Management in Pittsburgh. But “we’re getting to that point now where people are starting to get a little bit anxious about how much of a pause.”
Some investors turned to Treasury bonds Thursday. The 10-year T-note yield fell to 4.16% from 4.23% on Wednesday and now is at a four-week low.
The government’s report of a 1.2% jump in retail sales in December was offset by rising claims for jobless benefits, raising questions about the economy’s strength, analysts said. Rising oil prices also could hurt consumer spending, some said.
Also Thursday, the Treasury sold $10 billion of inflation-protected 10-year notes at a yield of 1.725%.
Among the day’s highlights:
* In the auto sector, Ford lost 24 cents to $14.08, DaimlerChrysler slid 98 cents to $45.71 and Toyota fell 89 cents to $80.21.
* Verizon Communications fell for a 12th straight day after brokerage Credit Suisse First Boston downgraded the phone company to “neutral” from “outperform,” citing rising competition from Internet-based calling services. The stock, a Dow member, sank $1.13 to $37.10.
* In the tech sector, Intel lost 34 cents to $22.82, Microsoft slipped 51 cents to $26.27 and Dell gave up 64 cents to $40.29.
* Home builders rallied as bond yields fell. Toll Bros. gained $2.93 to $72.65 and KB Home was up $2.51 to $106.
* Many energy stocks rose with oil prices. Valero Energy added $1.61 to $46.97 and Apache gained $1.43 to $51.14.
* Health services stocks attracted buyers. Long Beach-based Molina Healthcare rose $2.76 to a new high of $52.96.
