Indexes sink as data fan new fears
Wall Street sank Thursday as bulging oil inventories deflated energy shares and after the weakest reading on mid-Atlantic manufacturing activity since 2001 added evidence the economy was in or near recession.
Investors again ran for the perceived safety of U.S. Treasury securities, driving yields down sharply.
Some investors also jumped into gold, pushing the metal’s price to a new high.
The Dow Jones industrial average tumbled 142.96 points, or 1.2%, to end at 12,284.30.
The Standard & Poor’s 500 slid 17.50 points, or 1.3%, to 1,342.53. The Nasdaq composite dropped 27.32 points, or 1.2%, to 2,299.78.
Smaller stocks were hit harder. The Russell 2,000 index lost 1.9%.
Losers outnumbered winners by nearly 3 to 1 on the New York Stock Exchange.
The Philadelphia Federal Reserve Bank said an index of manufacturing activity shrank again in the U.S. mid-Atlantic region this month, to the worst reading in seven years.
That fanned recession fears, and “the buyers just kind of walked away” on Wall Street, said Fred Dickson, market strategist at D.A. Davidson & Co. in Lake Oswego, Ore.
What’s more, the Conference Board’s gauge of leading economic indicators declined for a fourth straight month in January, the group said.
The news drove down shares of some companies whose businesses are particularly vulnerable to the economy’s swings.
General Motors dropped $1.24, or nearly 5%, to $24.30. Boeing slumped $1.99, or 2.4%, to $82.01.
The market has been trying to sustain a rebound in recent weeks after indexes in late January hit their lowest levels in more than a year.
“What you’re seeing is a tug of war out there,” said Arthur Hogan, chief market analyst at Jefferies & Co. “There are those that believe we’re in a recession and earnings will move lower, and others that feel we’re working on a bottom. That can change the direction of stocks minute by minute.”
In commodities trading, near-term crude oil futures fell $1.47 to $98.23 a barrel after reaching an all-time high Wednesday.
The government reported that U.S. oil inventories climbed more than expected in the latest week.
The news helped trigger selling in energy stocks. Chevron, which joined the Dow index Tuesday, dropped $1.56 to $84.78. Occidental Petroleum gave up $3.06 to $73.09.
The economic data gave investors another excuse to buy Treasury securities as a haven, analysts said.
The yield on the 10-year T-note fell to 3.78% from 3.89% on Wednesday, which was a seven-week high.
The two-year T-note slid to 1.98% from 2.13%.
The Philadelphia manufacturing report reinforced expectations that the Federal Reserve would continue to cut short-term interest rates to help the economy. Fed policymakers meet again March 18.
But more Fed easing of credit could add to inflation worries. On Wednesday the government said the consumer price index rose 0.4% in January, above expectations. The annualized rate of inflation in the 12 months ended in January was 4.3%.
Inflation fears have helped to drive gold higher. On Thursday near-term gold futures in New York rallied $11.50 to a record $946.10 an ounce.
“Lowering [interest] rates is only going to make inflation worse and force people into commodities,” said Leonard Kaplan, president of Prospector Asset Management in Evanston, Ill.
Gold also benefited as the dollar sank anew. The euro rose to $1.482, up from $1.472 on Wednesday and $1.449 two weeks ago.
Among the day’s market highlights:
* Some commodity stocks pulled back after hefty gains in recent days. Kaiser Aluminum fell $2.83 to $71.99. Cleveland-Cliffs lost $2.32 to $119.76.
But in the gold sector, Goldcorp jumped $1.24 to $40.35.
* Retailers were weak. Kohl’s dropped $1.48 to $44.59. Safeway slid $2.28 to $29.66 after a disappointing earnings report.
* Career Education sank $1.79 to $15.71 after the secondary-education company said tightening credit conditions would cut into its 2008 operating income by $40 million to $60 million.
* On the plus side, Research in Motion jumped $8.78, or 9%, to $106.69. The company originally predicted subscriber gains of 1.82 million for its Blackberry service in the current quarter but now expects as many as 2.18 million. Total subscribers will climb to about 14 million by the end of the quarter, Research in Motion said.
* Terex gained $4.52 to $66.73. The world’s third-largest maker of construction equipment said fourth-quarter earnings rose 72%, helped by international demand. The company forecast 2008 profit and sales that topped analysts’ estimates.
