Stocks pounded by rising oil prices
NEW YORK – Rising crude oil prices and disappointing earnings from Hewlett-Packard Co. sent stocks plummeting Thursday, with the Dow shedding more than 120 points and all three major indexes reaching new year-to-date lows.
Crude surged past the $45 per barrel mark, trading at $45.50, up 70 cents, on the New York Mercantile Exchange. That raised concerns that the Federal Reserve, which hiked interest rates to 1.5 percent on Tuesday, would have to be aggressive in further rate increases to combat inflation — at the same time that earnings growth and the economy is slowing down.
On top of the oil issue, Hewlett-Packard was the latest in a string of technology companies to disappoint Wall Street with second-quarter earnings. Like Cisco Systems Inc. and National Semiconductor Corp. earlier this week, HP said its third quarter would be similarly grim.
The Dow Jones industrial average fell 123.73, or 1.2 percent, to 9,814.59. It was the third triple-digit drop in the Dow in the past six sessions, and broke through the 2004 low set on Monday. It was the lowest close on the Dow since Nov. 28.
Broader stock indicators were also substantially lower. Hit hard by HP’s earnings and the other warnings, the Nasdaq composite index was down 29.93, or 1.7 percent, at 1,752.49. It was the Nasdaq’s lowest close since Aug. 18, 2003.
The Standard & Poor’s 500 index dropped 12.56, or 1.2 percent, to 1,063.23, its lowest finish since Dec. 10.
Mixed economic news did little to help matters. The Labor Department said first-time jobless claims moved to a five-week low, perhaps signaling some moderation in a very disappointing job market. However, the Commerce Department reported that business inventories rose by 0.9 percent in June, the biggest jump in four years — a sign that businesses are having trouble moving products off the shelves.
The department also reported an 0.7 percent increase in retail sales for July, up from a 0.5 percent decrease in June but less than the 1 percent gain economists expected. Retail sales are considered a strong indicator of the state of the economy, which is fueled in large part by consumer spending.
And consumer prices are in danger of rising should oil prices continue their rise, since companies have to pay fuel prices to ship their products to stores.
Hewlett-Packard’s problems were due to corporate spending, not consumers. The company blamed “execution issues” in its corporate and enterprise sales divisions, and said it would make management changes immediately. HP, which missed estimates by 7 cents per share, plunged $2.57, or 13 percent, to $16.95.
Closely watched retailers Wal-Mart Stores Inc. and Target Corp. both released earnings Thursday that beat Wall Street estimates. Wal-Mart, which earned a penny per share more than expected, said it was concerned about increased shipping prices due to fuel costs, but gave an otherwise upbeat assessment. Wal-Mart rose $1.02 to $52.65.
The Russell 2000 index of smaller companies was down 9.53, or 1.8 percent, at 517.10, also a new low for the year to date.
Declining issues outnumbered advancers by nearly 3 to 1 on the New York Stock Exchange, where preliminary consolidated volume came to 1.94 billion shares, compared to 1.73 billion on Wednesday.
Overseas, Japan’s Nikkei stock average fell 0.2 percent. In Europe, Britain’s FTSE 100 closed up 0.4 percent, France’s CAC-40 slipped 0.3 percent for the session, and Germany’s DAX index dropped 0.6 percent in late trading.