Stocks slip as falling oil prices pull down energy companies
U.S. stocks finished mostly lower Monday as the price of oil continued to dive thanks to the strong dollar. Energy companies took the biggest losses as U.S. crude hovered around $40 a barrel, its lowest price in almost four months, and materials companies also traded lower.
Every oil, gas and pipeline company in the Standard & Poor’s 500 index finished lower as a slump in the price of oil and other fuels extended into a third week. The losses for energy and mining, chemical and building companies canceled out gains for technology and healthcare companies. A survey showed U.S. manufacturing continued to grow in July but at a slower pace than the month before. That, too, is linked to strength in the dollar.
“Manufacturing and oil have moved in lockstep for the better part of five years,” said Steve Chiavarone, associated portfolio manager for Federated Investors.
The Dow Jones industrial average fell 27.73 points, or 0.2%, to 18,404.51. The S&P 500 slipped 2.76 points, or 0.1%, to 2,170.84. The Nasdaq composite rose 22.06 points, or 0.4%, to 5,184.20. The Nasdaq also rose last week while the other major indexes fell. The Dow and S&P 500 set all-time highs recently and the Nasdaq is within 1% of the record it set in July 2015.
A survey by the Institute for Supply Management said U.S. factories expanded for the fifth month in a row, although its survey reading was lower in July than it was in June and factory employment decreased. A survey of manufacturing in Europe showed a similar result, and two surveys showed manufacturing activity in China was relatively weak in July.
The dollar has been gaining strength in the last few years, and although it appeared to level off recently, it appears to be picking up again because investors are realizing the Federal Reserve may raise interest rates this year. Chiavarone said that’s starting to hurt oil prices and slow down U.S. manufacturing. When the dollar gets stronger, oil falls because it’s priced in dollars.
See the most-read stories in Business this hour »
Benchmark U.S. crude fell $1.54, or 3.7%, to $40.06 a barrel in New York. Brent crude, which is used to price international oils, sank $1.39, or 3.2%, to $42.14 a barrel in London. The price of oil has fallen 13% in a little more than two weeks, and during the day it traded below $40 a barrel for the first time since April 8. Exxon Mobil shares fell 3.5% to $86.85, its biggest loss since January. Chevron shed 3.3% to $99.11.
Ionis Pharmaceuticals rose after it said a drug designed to treat spinal muscular atrophy in infants worked in a late-stage clinical study. It also said drugmaker Biogen exercised an option to develop the drug globally and will pay Ionis $75 million. Biogen plans to start seeking marketing approval for the drug, nusinersen, in the next few months. Ionis surged 30.2% to $38.01 and Biogen rose 4.1% to $301.83, more than any other S&P 500 stock.
Those moves helped pull healthcare stocks higher. Technology and consumer stocks also gained ground, and the S&P 500 consumer company and tech indexes reached annual highs. Netflix rose 3.4% to $94.37 and Apple advanced 1.8% to $106.05.
The dollar edged up to 102.35 yen from 102.03 yen. The euro fell to $1.1169 from $1.1179.
Bond prices fell and the yield on the 10-year U.S. Treasury note rose to 1.52% from 1.45%, reversing Friday’s slide in bond yields. That’s also a sign more investors are expecting higher interest rates.
Tesla Motors agreed to buy SolarCity for $2.6 billion in stock. Investors had hoped for more. SolarCity has 45 days to seek better offers. SolarCity also cut its guidance Monday. Its stock fell 7.4% to $24.72. Tesla fell 2% to $230.01.
Caesars Entertainment rose 6.7% to $7.36 after it said it agreed to sell its social and mobile games business to a Chinese consortium for $4.4 billion.
Verizon Communications agreed to buy Fleetmatics Group for $2.4 billion, or $60 per share. Fleetmatics makes software that cable companies, energy companies and others use to manage vehicle fleets. Its stock jumped 38.7% to $59.59 and Verizon fell 1.6% to $54.50.
Britain’s FTSE 100 fell 0.5%, the CAC-40 in France gave up 0.7% and Germany’s DAX fell 0.1%. Japan’s Nikkei 225 stock index gained 0.4% and Hong Kong’s Hang Seng index jumped 1.1%. South Korea’s Kospi gained 0.7%.
Wholesale gasoline fell 2 cents to $1.30 a gallon. Heating oil fell 5 cents, or 3.8%, to $1.28 a gallon. Natural gas fell 11 cents, or 3.7%, to $2.77 per 1,000 cubic feet.
Gold rose $2.10 to $1,359.60 an ounce, silver rose 15 cents to $20.50 an ounce and copper fell 2 cents to $2.20 a pound.
MORE FROM BUSINESS
German company plugs into L.A. area for its electricity storage operation
Closing the Bank of Mom and Dad
Looking for work? Airlines will need 617,000 pilots over next 20 years
UPDATES:
3:25 p.m.: This article was updated with closing prices and additional information.
12:50 p.m.: This article was updated with more recent prices and additional information.
This article was originally published at 9:50 a.m.
