Oil price surge puts pressure on stocks
Wall Street extended its losses Wednesday as a rise in oil prices and a profit warning from United Parcel Service raised investors’ anxiety about the well-being of the economy.
Technology names were among the steepest decliners, with the tech-dominated Nasdaq composite index falling more than 1%.
The continuing surge in oil prices weighed on transportation stocks and contributed to a pessimistic tone in the market. Crude prices jumped following a government report showing U.S. inventories fell by more than expected last week. The rise hurt shares of airline and trucking companies, which have already struggled with high fuel costs.
UPS, the world’s largest shipping carrier, pointed to a weaker economy and higher fuel costs in trimming its forecast. Investors this week received reports from aluminum producer Alcoa and chip maker Advanced Micro Devices that have made the market uneasy about overall first-quarter results.
Investors are nervous about the implications, including inflation, of higher oil prices, said Joe Kinahan, chief derivatives strategist for brokerage service Thinkorswim Group Inc. Still, he said, the relative calmness seen in the markets in recent sessions is impressive even as investors remain cautious about the economy.
“It’s the first week we have had in a while where stocks are trading on their own merit. That’s why we’re trading on oil,” he said. “It’s amazing how well the market has held in there with three days of not good news.”
The Dow Jones industrial average fell 49.18, or 0.39%, to 12,527.26.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 11.05, or 0.81%, to 1,354.49, and the Nasdaq declined 26.64, or 1.13%, to 2,322.12.
The Russell 2000 index of smaller companies fell 13.54, or 1.9%, to 698.38.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange.
Wednesday’s news bolstered the idea that the credit markets remain tight and the economy continues to slow, which prompted investors to put more money into Treasury issues. Bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.48% from 3.56% late Tuesday.
Light, sweet crude jumped $2.37 to settle at a record $110.87 a barrel on the New York Mercantile Exchange after earlier rising as high as $112.21. The previous intra-day record, set last month, was $111.80.
The rise in oil hurt transportation stocks. Three small air carriers have suspended operations recently -- in part because of high fuel prices. Among airlines, Continental Airlines fell $1.66, or 7.6%, to $20.24, while trucking company J.B. Hunt fell $1.92, or 6%, to $29.85.
Gold prices rose $19.60 to $933.60, while the dollar was mixed against other major currencies.
Some investors have grown worried that profit warnings from such companies as UPS could signal the economy is facing a tougher climb and that further disclosures could derail hopes for an recovery in the second half of the year, said Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pa.
“We know the first quarter is not going to be good. UPS is sort of indicating that maybe things are continuing to be not so positive out there,” Schultz said.
Kinahan said that technology shares showed steeper declines Wednesday because investors seemed uncertain about what the next catalyst might be to drive tech issues. He noted that while Apple had been a strong performer, investors seem to be wanting more reason to buy into the sector. Apple fell $1.40 to $151.44.
In corporate news:
UPS’ earnings forecast weighed on the stock. UPS warned at an investor conference last month that it might miss its earnings target if weakness seen in February didn’t ease. UPS fell $2.74, or 3.7%, to $70.57.
AMR fell $1.15, or 11%, to $9.17 after its American Airlines canceled more than 1,000 flights to inspect the wiring on some of its aircraft.
Boeing delayed its 787 jetliner by six more months, pushing the aircraft’s debut to the third quarter of next year. Still, some analysts had expected a greater delay. The stock rose $3.58, or 4.8%, to $78.60.
