Stocks Ease as Oil Hits Record
Stocks ended mostly lower Monday as record oil prices weighed on investor sentiment. But analysts said the market showed surprising resilience as crude neared $60 a barrel.
The Dow Jones industrial average slipped 13.96 points, or 0.1%, to 10,609.11, after rising for seven consecutive sessions through Friday.
Near-term oil futures in New York jumped 90 cents to a record $59.37 a barrel on continuing concerns about global supplies.
“We’re up to near $60 a barrel now and equities held up well,” said Carter Worth, chief market technician at Oppenheimer & Co. in New York. That’s a sign that investors don’t believe that share prices are “overextended,” he said.
Blue-chip stock indexes reached three-month highs last week, and some market sector indexes hit record highs, as investors continued to pump money into equities even as oil prices advanced.
But some analysts said they doubted that Wall Street would be able to ignore rising energy prices much longer.
“Oil prices going up and up is definitely going to slam the economy into reverse,” said Michael Vogelzang, who oversees $5 billion as chief investment officer at Boston Advisors. “Lower stock prices are certainly expected from higher oil prices.”
Among broader indexes on Monday, the Standard & Poor’s 500 slipped 0.86 point, or less than 0.1%, to 1,216.10. The Nasdaq composite eased 1.98 points, or 0.1%, to 2,088.13.
Stocks fell early in the day then rallied later in the session.
S&P;’s index of mid-size stocks, which hit a record high Friday, lost 2.19 points, or 0.3%, to 691.09.
Falling stocks outnumbered winners by about 3 to 2 on the New York Stock Exchange and on Nasdaq. Trading volume declined after soaring Friday, when it was pumped up by the quarterly expiration of popular stock index option contracts.
In other markets, Treasury bond yields rose after comments by some Federal Reserve officials reinforced expectations for further increases in the central bank’s key short-term rate.
Federal Reserve Bank of Minneapolis President Gary Stern, in an interview with a Japanese newspaper, said there was “no reason” for the Fed to stop raising rates.
Jeffrey Lacker, president of the Richmond Fed, said after a speech in Hot Springs, Va., that it would be premature to declare that the Fed’s strategy of measured rate hikes was near an end. “It’s too soon to say when we’re going to stop,” he told reporters.
The Fed’s next meeting is June 29-30. Policymakers are expected to raise their key rate from 3% to 3.25%, the ninth such increase since last June.
In trading Monday, the yield on the 10-year T-note rose to 4.11% from 4.07% on Friday. The yield has crept higher since reaching a 2005 low of 3.89% on June 1.
Markets showed little reaction to the Conference Board’s report that its index of leading economic indicators fell more than expected in May, suggesting weaker economic growth in the second half.
Among the day’s highlights:
* Energy stocks were mixed as crude prices hit a record. Apache jumped $1.33 to a record $67.96 and EOG Resources rose $1.18 to a record $57.33, but Exxon Mobil slipped 4 cents to $60.85 and ConocoPhillips fell 56 cents to $60.12.
* Steel stocks weakened after the International Iron & Steel Institute said China’s steel production rose 38% in May, boosting concerns about a supply glut. U.S. Steel fell $1.78 to $39.41; Mechel Steel lost $1.04 to $25.90.
* Home builders’ shares pulled back after many hit record highs Friday on optimism about continued strong sales. KB Home slid $2.55 to $74.70, Ryland Group fell $1.67 to $74.70 and Toll Bros. dropped $3.62 to $100.85.
Many real estate investment trust shares also were hit by profit taking. A Bloomberg News index of REIT shares slipped 0.2% after hitting a record high Friday. It is up 5% year to date. By contrast, the S&P; 500 index is up 0.3% this year.
* Cable TV operators rose after Cablevision Systems Chairman Charles Dolan made a bid to take the company private. The deal values Cablevision at $33.50 a share. The stock surged $5.13, or 19%, to $32.
Comcast climbed 49 cents to $32.06 and Time Warner added 35 cents to $17.13.
* Canada’s main stock index rallied 50.54 points, or 0.5%, to 9,998.11, its highest since 2000, on gains in energy stocks. The S&P;/TSX index is up 8.1% this year in Canadian dollars and is up 5% when measured in U.S. dollars.
