World Stock Markets Tumble
Is that it for the new year’s rally?
Stocks fell worldwide Tuesday, clipped by soaring oil prices and by a possible Internet company scandal in Japan.
After regular U.S. trading ended, disappointing earnings reports from Yahoo and Intel threatened to pour more cold water on what has been a hot start to the year for technology shares.
On Wall Street, the market opened lower after the three-day holiday weekend and drifted in a narrow range the rest of the session, awaiting quarterly profit reports from companies including Yahoo, Intel and IBM.
A surge in oil prices, on concerns over political unrest in Nigeria and over Iran’s nuclear-research program, set a poor tone for stocks. Near-term crude futures in New York jumped $2.39 to $66.31 a barrel, the highest closing price since Sept. 29. Oil has rocketed $10 a barrel since mid-November.
The rebound in oil “brings back fear about how much the economy could slow,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
The Dow Jones industrial average lost 63.55 points, or 0.6%, to 10,896.32, its fourth decline in five sessions. Most other key U.S. indexes also fell less than 1%.
The Standard & Poor’s 500 dropped 4.68 points, or 0.4%, to 1,282.93. The technology-dominated Nasdaq composite gave up 14.35 points, or 0.6%, to 2,302.69.
Falling stocks outnumbered winners by about 2 to 1 on the New York Stock Exchange.
Some investors bought Treasury bonds as higher oil prices raised questions about economic growth this year. The 10-year T-note ended at 4.33%, down from 4.35% on Friday and the lowest since Sept. 30.
Stock losses were heavier in many foreign markets that had far outpaced Wall Street in 2005.
Japan’s Nikkei-225 index tumbled 462.08 points, or 2.8%, to 15,805.95, after prosecutors raided the offices of maverick Japanese Internet portal Livedoor Co. on suspicion that it had violated securities laws. Livedoor’s shares dived 14.4% and pulled other tech issues down with it.
In Mexico, profit-taking drove the IPC index down 468.66 points, or 2.5%, to 18,489.63. The index hit a record high last week.
South Korea’s composite index sank 2.3% and Brazil’s market dropped 1.1%.
The tech stock sector faced more bad news after regular U.S. trading ended. Yahoo reported operating earnings of 16 cents a share in the fourth quarter, a penny shy of analysts’ consensus estimate. And Intel’s quarterly profit also missed expectations.
Yahoo plunged to a three-month low of $34.70 in after-hours trading. It had closed up 21 cents to $40.11 in regular trading. Intel sank to $23.10 after hours, after falling 27 cents to $25.52 in regular trading.
“It looks like the tech rally has had a little hiccup,” said Stephen Massocca, co-chief executive at brokerage Pacific Growth Equities in San Francisco.
Tech shares had helped lead the market higher in the first two weeks of the year on expectations of strong earnings growth in the industry in 2006.
There was some good news from the tech sector Tuesday. IBM’s quarterly earnings beat expectations in its report after regular trading. Teradyne, which makes semiconductor testing equipment, also reported better-than-expected results.
Earnings season continues today with reports from companies including Apple Computer, Advanced Micro Devices and EBay.
Among Tuesday’s market highlights:
* Airline stocks were hammered as oil prices rose and as Continental Airlines warned of a “significant” first-quarter loss. Continental slid $2.23 to $17.24, American Airlines parent AMR sank $1.46 to $18.86 and ExpressJet lost 44 cents to $7.64.
* Insurance stocks were broadly lower after a study estimated that a U.S. bird flu pandemic could cost the insurance industry $133 billion in extra death claims. American International Group fell $1.01 to $69.04, Safeco gave up 76 cents to $57.05 and Hartford Financial sank 89 cents to $86.80.
* Energy-related stocks were the day’s big winners as oil prices rallied. ConocoPhillips jumped $3.53 to $64.29, Chevron added $1.50 to $61.86 and EOG Resources was up $2.35 to $82.54.
The XLE fund, an exchange-traded fund that owns the major energy stocks in the S&P; 500, hit a record, up $1.20 to $55.66.
* Some industrial issues advanced after the Federal Reserve said U.S. industrial production rose 0.6% in December, beating economists’ consensus estimate. Pasadena-based Ameron, which makes concrete and steel pipe, rose 33 cents to a record $52.15; steelmaker Nucor gained $1.08 to $70.55.
