Market drops ahead
of Fed rate decision
NEW YORK » Stocks plummeted yesterday as heightened fears of another hurricane hitting the Gulf Coast sent oil prices racing past $67 a barrel and investors grew anxious about the Federal Reserve's upcoming interest-rate meeting.
Wall Street saw some bright spots in merger activity and strong earnings from Nike Inc. and Carnival Corp., but the market became increasingly uneasy as surging energy prices threatened consumer spending. Investors also awaited the Fed's decision today whether to raise rates or halt its string of increases to mitigate an economic slide following Hurricane Katrina.
With an intensifying Tropical Storm Rita nearing Florida's tip and poised to hammer the Gulf Coast just weeks after Katrina's devastation, the market retreated heavily late in the session amid light trading volume.
"Front and center would be concerns of the storm approaching tomorrow (today), of which you're seeing crude oil trading up $4," said Steven Goldman, chief market strategist at Weeden & Co., who noted a steep decline in oil prices at midday.
Crude oil made its biggest one-day gain ever, even as OPEC neared a consensus on selling 2 million additional barrels a day to offset a potential supply shortage from recent refinery shutdowns. On the New York Mercantile Exchange, a barrel of light crude jumped $4.39 to $67.39, as gasoline futures climbed 24 cents to $2.04 a gallon.
At the close of trading, the Dow Jones industrial average dropped 84.31, or 0.79 percent, to 10,557.63. The Standard & Poor's 500 index fell 6.89, or 0.56 percent, to 1,231.02, and the Nasdaq composite index sank 15.09, or 0.7 percent, to 2,145.26.
Bonds rose, with the yield on the 10-year Treasury note sliding to 4.25 percent from 4.27 percent on Friday.
In corporate news, Nike, the world's biggest shoemaker, said higher sales across the board helped lift its first-quarter profit 32 percent to easily beat Wall Street expectations. Worldwide future orders for products scheduled for delivery through January 2006 grew 11 percent to $4.9 billion, the company added. Nike surged $4.99 to $83.45.
Cruise-ship operator Carnival posted a 12 percent gain in third-quarter profit, as revenue swelled from increased ship capacity and ticket prices. The company also said while the hurricane has depressed results in the latest quarter, recent bookings remain strong and average prices are above the year before. Carnival added $1.75 to $50.78.
Sirius Satellite Radio Inc. raised its projected full-year revenue by $5 million to $230 million, but the expanded forecast still fell short of analyst targets for $234.5 million. The company maintained estimates for 3 million subscribers by year-end, up from about 2.1 million as of last week. Sirius fell 35 cents to $6.70.