High oil prices push stocks lower
Investors extended their blue chip selloff Thursday as oil prices neared their all-time highs, renewing Wall Street’s concerns that high energy costs would deflate third-quarter earnings. Only the Nasdaq composite index managed a minimal gain.
Analysts said oil prices, which continued their climb after shooting past $48 Wednesday, would keep consumer spending down and business costs rising, a combination that will squeeze profit margins and lower third-quarter earnings. A barrel of light crude settled at $48.46 Thursday, up 11 cents on the New York Mercantile Exchange, after reaching an intraday high of $49. Crude futures closed at a record high $48.70 on Aug. 19 and set a new intraday record of $49.20 on Aug. 20.
Oil prices were also blamed, in part, for a lower reading on the Conference Board’s index of leading economic indicators, the third straight monthly decline. Investors believed the forward-looking index sent a signal that economic growth has been slowing and would likely taper off through the end of the year.
“When you take a look at the leading economic indicators, it’s very clear that the price of oil is having an impact on the economy,” said Hugh Johnson, chief investment officer at First Albany Corp. “Just look at the negative earnings statements from some of the most stable companies out there. If the markets are going to move higher, we’re going to need some relief on the oil front so that the earnings picture improves.”
The Dow Jones industrial average fell 70.28, or 0.7 percent, to 10,038.90, the second straight day of losses and third in the last four sessions. The Dow lost more than 135 points Wednesday, and is now at its lowest level since Aug. 17.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was down 5.20, or 0.5 percent, at 1,108.36, while the Nasdaq composite index gained just 0.72, or 0.04 percent, to 1,886.43.
Stocks listed on the tech-focused Nasdaq were generally oversold far more this year due to a weaker technology sector, and the retreat in blue chips was seen as bringing their valuations back in line with the small-cap stocks common to the Nasdaq.
Declining issues barely outnumbered advancers on the New York Stock Exchange, where preliminary consolidated volume came to 1.62 billion shares, compared to 1.72 billion on Wednesday.
The Russell 2000 index of smaller companies was down 0.09, or 0.02 percent, at 565.80.
Overseas, Japan’s Nikkei stock average fell 0.6 percent. In Europe, Britain’s FTSE 100 closed down 0.5 percent, France’s CAC-40 dropped 1.1 percent for the session, and Germany’s DAX index slid 0.9 percent in late trading