Commodities Pull Down Stocks
A sudden wave of profit taking in commodity-related stocks and in smaller shares left Wall Street broadly lower on Tuesday, and a poor reception for new three-year Treasury notes also damped the mood.
A sharp decline in crude oil hurt the stock market instead of helping it by pulling energy stocks down.
The losses in natural-resources issues and other sectors sent the blue-chip Standard & Poor’s 500 index to its lowest closing level this year. It fell 10.24 points, or 0.8%, to 1,254.78.
Investors also sold small-company shares, many of which had surged in January on optimism about the economy. The Russell 2,000 small-stock index slumped 1.5%.
The Dow Jones industrial average held up better than broader indexes. The Dow lost 48.51 points, or 0.5%, to 10,749.76. The technology sector also fared relatively well. The Nasdaq composite index gave up 13.84 points, or 0.6%, to 2,244.96.
But falling stocks outnumbered winners by 2 to 1.
Gold, silver, oil in a barrel -- “anything you can drop on your foot and it hurts” -- tumbled on Tuesday, said Gary Kaltbaum, a money manager in Orlando, Fla.
Prices of many commodities have rocketed in recent years, powered in part by heavy demand from China. That has lured investors and speculators to hard assets, particularly in recent weeks, analysts say.
Copper prices have reached record highs in recent days. Gold has hit 25-year highs.
A pullback was inevitable, traders said. “This was a commodity flush-out,” Tom Boustead, an analyst with Man Financial, said of Tuesday’s sell-off.
Near-term gold futures in New York dived $19.20, or 3.4%, to $551 an ounce. Futures prices of copper, aluminum, platinum and other metals also sank.
Crude oil futures lost $2.02 to $63.09 a barrel, the lowest closing price since Jan. 5, on expectations that weekly data due today on U.S. inventories will show a further rise in supplies.
With winter nearing an end, “It’s clear [natural] gas and heating-oil stocks will be sufficient,” said Joseph Allman, an analyst at RBC Capital Markets in Houston. That is putting downward pressure on prices, despite continuing worries about geopolitical issues.
In the bond market, the Treasury’s sale of $21 billion in three-year notes -- the first part of its so-called quarterly refunding to raise fresh cash -- was met with disappointing demand. The notes were sold at a yield of 4.595%. Indirect bidders, the class of investors that includes foreign central banks, bought 22% of the securities, the smallest share since August 2003.
The Treasury will sell 10-year notes today and 30-year bonds Thursday. The yield on the existing 10-year T-note rose to 4.57% Tuesday from 4.55% Monday.
Among the day’s market highlights:
* Energy-related shares saw heavy selling. Halliburton plunged $4.47 to $72.98, although it still is up 18% year to date. Occidental Petroleum fell $3.89 to $90.10 and Exxon Mobil lost $1.42 to $60.55.
* Among mining issues, Phelps Dodge slid $12.66 to $152.53, Falconbridge dropped $1.93 to $31.57 and Glamis Gold plunged $2.95 to $28.64.
* Home builders retreated after Toll Bros. slashed its sales forecast. Toll Bros. tumbled $1.73 to $29.47, a 52-week low. Ryland lost $2.01 to $67.62 and KB Home dropped $2.64 to $67.50.
* Newport Beach-based chip maker Conexant plummeted 66 cents, or 19.6%, to $2.70 after a jury said the company should pay Texas Instruments $112 million for patent infringement. Conexant said it would appeal. Texas Instruments rose 8 cents to $30.62.
* On the plus side, Walt Disney rallied $1.74 to $26.70 on its quarterly earnings report.
Glendale-based document-services company American Reprographics also bucked the market downtrend, adding $1.31 to $28.15, a new high.
