Stocks Fall Again on Rising Energy Costs
Stocks slumped for a second straight day Wednesday, hit by a renewed climb in oil prices and more concerns about waning consumer confidence.
An earnings warning from Walt Disney also hurt sentiment.
In other markets, gold benefited from uncertainty about the economic outlook, moving back toward $450 an ounce and near the highest price in 17 years.
On Wall Street, stocks were flat for much of the day, then sold off modestly in the final two hours. The Dow Jones industrial average ended with a loss of 52.54 points, or 0.5%, to 10,544.90.
The Standard & Poor’s 500 index posted a smaller drop than the Dow, in part because another rally in energy stocks offset losses in other sectors. The S&P; 500 eased 4.04 points, or 0.3%, to 1,227.16.
The technology-heavy Nasdaq composite index dropped 22.42 points, or 1%, to 2,149.33 as Internet-related shares were dragged lower by a sharp sell-off in Chinese Internet search firm Baidu.com.
Losers topped winners by about 5 to 3 on the New York Stock Exchange and by 2 to 1 on Nasdaq.
A rebound in oil prices set a negative tone for financial markets. Near-term crude futures in New York jumped $1.98 to $65.09 a barrel after the government’s weekly data on oil inventories showed a larger-than-expected decline.
Energy prices initially surged when Hurricane Katrina hit the Gulf Coast on Aug. 29, but prices had mostly been drifting lower since then -- until Wednesday.
The stock market, which rallied as energy prices fell in the last two weeks, has become more cautious this week about Katrina’s potential longer-term effects on energy costs and consumer spending.
Retailers were mostly lower for a second session Wednesday. On Tuesday, electronics retailer Best Buy warned of weaker earnings in the near term, and expressed concern about energy costs damping spending.
On Wednesday, the government said retail sales in August were up 1%, excluding auto sales. The increase was better than expected. But “all this data is pre-Katrina,” said Kevin Kruszenski, a stock trader at Keybanc Capital Markets in Cleveland. “Next month’s [data] is going to be a lot more important.”
Indeed, economists expect a dismal showing for the University of Michigan’s national consumer confidence survey when September results are announced Friday.
Even so, most analysts believe the Federal Reserve will raise its benchmark short-term interest rate when policymakers meet Tuesday. Twenty of 86 economists surveyed by Bloomberg News expect the Fed to hold its target rate at 3.5%. The rest expect the Fed to raise the rate by a quarter point.
The likelihood of another Fed tightening move helped to send Treasury bond yields higher Wednesday. The 10-year T-note rose to 4.16% from 4.13% on Tuesday.
Concerns about the economy have been good for gold in recent weeks. Near-term gold futures ended at $449.80 an ounce Wednesday, up $3.70. The price was as low as $420 in mid-July.
“Uncertainty is gold’s friend at this moment,” said Paul McLeod, vice president of precious metals at Commerzbank Securities in New York.
If gold tops about $456 an ounce it would reach the highest level in 17 years.
Among Wednesday’s market highlights:
* In the retail sector, Federated Department Stores fell $2 to $65.77, Kohl’s dropped $1.29 to $52.07 and Sears Holdings was off $1.38 to $128.87. Best Buy edged up 7 cents to $44.86 after diving $5.57 on Tuesday.
* Restaurant stocks also weakened. Panera Bread fell $1.84 to $51.87, Cheesecake Factory dropped 98 cents to $31.69 and Darden Restaurants, which owns the Red Lobster and Olive Garden chains, slid 73 cents to $30.02.
* Disney sank 70 cents to $24.11 after warning late in the trading session that its film unit’s losses this quarter would be worse than expected. Disney is one of the 30 Dow index stocks.
* On the plus side, energy stocks rose after two days of losses. Occidental Petroleum gained $1.74 to $85.88, Noble Energy rallied $1.02 to $88.55 and ENI jumped $2.15 to $147.77.
* Brokerage Lehman Bros. ended at a record high, up 13 cents to $112.41, after rallying as high as $115. The company said fiscal third-quarter profit surged 74% to a record $879 million, or $2.94 a share, as revenue from equity underwriting and trading almost doubled.
* Baidu.com’s plunge -- down $32.27 to $81.32, after two brokerages said it was overvalued -- hurt other Net-related shares. Google slid $8.68 to $303, Sohu.com fell 76 cents to $17.74 and Amazon.com lost 83 cents to $43.10.
* Canada’s S&P;/TSX stock index hit a five-year high, up 1% to 10,932.41, boosted by energy and gold-mining stocks. The index is up 18.2% year to date in Canadian dollars, and up 20% in U.S. dollars, compared with a 1.3% rise for the S&P; 500 index and a 2.2% drop for the Dow.
