Market lower on growth, oil worries
Another record high for oil prices and a sharp drop in consumer spending rattled investors Tuesday, sending stocks lower and halting a five-session winning steak for the Dow industrials. Technology stocks suffered the worst damage.
The market, already fretting over the impact of fuel costs on corporate profits, took another blow as U.S. crude prices jumped above $44 a barrel for the first time.
“It is built into the price of everything,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “As a result, it could raise the cost of products, which is inflationary, and cut into earnings, he said. “It’s that basic … that far-reaching.”
The Dow Jones industrial average fell 58.92, or 0.6 percent, to 10,120.24. The decline halted the Dow’s longest winning streak since November, an advance of 217 points that lifted the blue-chip measure back above 10,000.
Broad market indicators also dropped. The Nasdaq composite index fell 32.67, or 1.7 percent, to 1,859.42, while the Standard & Poor’s 500 index fell 6.93, or 0.6 percent, at 1,099.69.
Stocks have been trading in a narrow range in recent weeks as investors worry about rising interest rates and energy prices. And while the market overcame Monday’s jitters over energy prices and new threats of terrorism in the United States, sellers prevailed as the backdrop worsened on Tuesday.
As oil prices continued their climb, investors feared that consumers and businesses could face even higher fuel costs in coming months.
The contract for September deliver of light crude rose 33 cents to $44.15 on the New York Mercantile Exchange, the third straight closing record. On London’s International Petroleum Exchange, September Brent crude rose 67 cents to a new high of $40.64.
Meanwhile, the Commerce Department reported that consumers slashed their spending in June by the largest amount in three years, reinforcing other recent indications that the economic recovery slowed at the end of the second quarter.
The report said consumer spending dropped by a sharp 0.7 percent in June from the previous month. In May, consumers had ratcheted up spending a strong 1 percent. Americans’ incomes rose 0.2 percent in June, weaker than the 0.6 percent increase the month before. Both numbers were weaker than analysts had expected.
“We’re not getting much in the way of good economic news, so I’ve been a little bit surprised that the market has been as resilient as it has,” said Bernie Schaeffer, chairman of Schaeffer’s Investment Research in Cincinnati. He also expressed concern, however, that investors didn’t react more enthusiastically to the recent tide of corporate earnings reports.
“Declining issues outnumbered advancers by a 6-to-5 margin on the New York Stock Exchange, and by a 2-to-1 ratio on the Nasdaq stock market.
NYSE volume came to 1.34 billion shares compared with 1.27 billion shares on Monday.
The Russell 2000 index of smaller companies fell 8.30, or 1.5 percent, to 543.63.
Overseas, Japan’s Nikkei stock average dropped 0.7 percent, Britain’s FTSE 100 rose 0.3 percent, France’s CAC-40 rose 0.8 percent, and Germany’s DAX index rose 0.4 percent.