Stocks down as oil prices rise
Wall Street’s three-day winning streak came to an end Thursday as some investors, taking a second look at election results, questioned whether a Democratic Congress would be friendly to business.
The losing session was also influenced by rising oil prices and a drop in consumer confidence. Investors had driven stocks broadly higher this week amid a new round of mergers and optimism that there was little to fear from business-friendly Republicans losing control of Congress.
But after more time to mull over the election, investors are starting to become concerned about an “anti-business stance” among Democrats in Washington, said John O’Donoghue, co-head of equities at Cowen & Co.
“The market’s been looking for a reason to go to the downside, and a change in Washington is as good an excuse as any,” O’Donoghue said.
Meanwhile, U.S. consumers’ confidence weakened slightly in early November but stayed near a 15-month high, according to the University of Michigan. That data overshadowed good news from the Commerce Department that America’s trade deficit showed a sharp improvement in September, and a report from the Labor Department that said the number of newly laid off workers had a bigger than expected drop last week.
The Dow Jones industrial average fell 73.24 points, or 0.6%, to 12,103.30. The Dow reached a new closing high of 12,176.54 on Wednesday.
Broader stock indicators also fell. The Standard & Poor’s 500 index fell 7.39 points, or 0.5%, to 1,378.33, while the Nasdaq composite index fell 8.93 points, or 0.4%, to 2,376.01. The technology-laden Nasdaq was higher earlier in the day on strong earnings results from Cisco Systems.
Bond yields slipped after an auction of new 10-year U.S. Treasury notes was met with modest demand.
The $13 billion of new 10-year notes were sold at a high yield of 4.63%. The bid-to-cover ratio, a gauge of demand, was 2.21, broadly in line with recent averages. Indirect bidders, which include foreign central banks, purchased about 34% of the new 10-year notes, also in line with previous auctions this year.
The auction “was mediocre, nothing out of the ordinary. I think we’re probably going to be pretty steady for the rest of this week,” said Beth Malloy, bond market analyst at Briefing.com in Chicago.
The yield on existing 10-year notes fell to 4.61%, from 4.64% on Wednesday.
Crude prices extended their gains after the U.S. government reported gasoline inventories fell last week. A barrel of light sweet crude soared $1.33 to $61.16. Gold futures surged, rising $18.60 to $635 an ounce.
In other market highlights:
* Cisco surged $1.61, or 6.4%, to $26.71. After the close of trading Wednesday, the networking equipment maker said its acquisition of Scientific-Atlanta pushed profit up 28%. UBS also upgraded the stock on the results and predicted strong future growth.
* Hewlett-Packard also helped drive technology stocks after Goldman Sachs lifted the computer and printer maker’s 12-month price target to $46 from $42.50. Shares rose 68 cents, or 1.8%, to $39.56.
* Healthcare shares slid for a second day, losing 2.5% for the steepest drop among 10 industry groups in the S&P; 500. The sub-index had its largest one-day drop since October 2003 after the Democratic Party clinched majorities in both houses of Congress for the first time since 1994.
“We’re going to see rhetoric about drug pricing,” said Mark Bronzo, who helps manage $650 million at Gartmore Separate Accounts in Irvington, N.Y.
Merck tumbled $1.46 to $42.88 and Pfizer retreated 78 cents to $25.84. Johnson & Johnson, maker of the schizophrenia medication Risperdal, declined $1.84 to $66.15.
* Borders Group gained $2.11 to $23.65 after activist investor Bill Ackman said shares of the bookstore company looked cheap and bought an 11% stake in the company.
