Oil, earnings news depress market
A grim combination of higher oil prices and lowered outlooks from companies including Colgate-Palmolive Co., Unilever PLC and The New York Times Co. sent stocks sliding Monday. Blue chips bore the brunt of the selling.
The negative news from Colgate-Palmolive, its first profit warning in nearly a decade, and a brokerage downgrade of Citigroup Inc. pressured the Dow Jones industrials. Trading was light, as many investors stuck to the sidelines ahead of a key meeting of the Federal Reserve. But analysts noted unusually strong performance among semiconductor shares despite forecasts of slower growth from chipmakers. The Philadelphia semiconductor index surged 2.9 percent.
“It seems a contrarian view is developing in the tech sector. There’s a feeling that they’re probably oversold, and as a result we’re seeing investors having second thoughts about unloading them,” said Peter Cardillo, chief strategist with S.W. Bach & Co. “Unfortunately, the market as a whole is going to continue to live with this oil issue; there’s no indication prices are going to collapse anytime soon, so it will remain a daily focus.”
According to preliminary results, the Dow was down 79.57, or 0.8 percent, at 10,204.89, after a drop of 0.3 percent last week.
The broader gauges also fell. The tech-dominated Nasdaq composite index, buoyed by chip stocks early in the session, gave back those gains and closed down 2.02, or 0.1 percent, at 1,908.07, following a weekly gain of 0.8 percent. The Standard & Poor’s 500 index shed 6.35, or 0.6 percent, to 1,122.20, after advancing 0.9 percent last week.
Energy costs and earnings outlooks have competed for investors’ focus in recent weeks, but attention returned to interest rates ahead of the Fed’s Open Market Committee meeting set for Tuesday. Most economists agree the Fed will continue to tighten short-term interest rates at a measured pace by raising the federal funds rate another quarter of a percentage point to 1.75 percent. If the Fed steps back from its policy and decides not to raise rates, the markets could interpret it as a signal the economy is not doing as well as previously hoped.
Growing anxiety about global oil supply sent crude futures higher as beleaguered Russian oil giant Yukos announced plans to stop shipments to China. The latest event to aggravate the oil market came just days after Hurricane Ivan menaced rigs and threw tankers off course in the Gulf of Mexico. Light sweet crude for October delivery settled up 76 cents at $46.35.
The earnings picture for the current quarter remains somewhat cloudy amid a series of gloomy outlooks. Although analysts remain largely upbeat about the market’s underlying fundamentals, investors are growing increasingly worried about slower growth in the second half.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange.
The Russell 2000 index, which tracks smaller company stocks, was down 2.43, or 0.4 percent, at 570.74.
Overseas, Japanese financial markets were closed for Respect for Aged Day, a national holiday. They will reopen Tuesday. In Europe, France’s CAC-40 shed 0.6 percent, Britain’s FTSE 100 declined 0.3 percent and Germany’s DAX index fell 0.3 percent.