Closing Market Report
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Market takes hit as oil passes $66
By Ellen Simon
Associated Press
NEW YORK » Stocks skidded yesterday as oil prices rose past $66 a barrel and Wells Fargo & Co. and other bank earnings disappointed the market.
U.S. investors sold equities as crude oil futures soared after an attack on an oil platform in Nigeria, the fifth largest oil exporter to the United States. A barrel of light crude settled at a three-and-a-half month high of $66.31, up $2.39, in trading on the New York Mercantile Exchange.
Oil prices have been creeping higher for weeks but yesterday's "sharp, violent rise" bit into stocks as investors consolidated gains from the first weeks of January, said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn.
Disappointing bank earnings also spurred selling. Wells Fargo missed analysts' expectations, saying a spike in personal bankruptcies in the fourth quarter hurt its results. Cincinnati-based Fifth Third Bancorp said its margins are narrowing and its net interest income fell 2 percent from the year-ago period.
Falling international markets also troubled U.S. investors. Japan's main stock index fell 2.84 percent, its biggest loss in nearly two years, after Tokyo-based Internet company Livedoor Co. was raided Monday evening over suspected securities violations. The news sparked a selloff of other Internet companies and pushed down auto and electronics stocks. Other international markets also dropped yesterday.
The Dow Jones industrial average fell 63.55, or 0.58 percent, to 10,896.32.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 4.68, or 0.36 percent, to 1,282.93, and the Nasdaq composite index lost 14.35, or 0.62 percent, to 2,302.69.
All the major indexes had a strong start to 2006, hitting 4 1/2-year highs in the first two weeks of trading after minutes from the most recent meeting of Federal Reserve policy makers showed the central bank's views on inflation were more moderate. Many investors took the minutes as a sign that the Fed's 18-month streak of short-term interest rate hikes was nearing its end.
More recently, trading has been choppy as investors reacted strongly to oil price increases or any hint of weak earnings.
"If oil continues to stay at these levels for a sustained period, it will bite into economic activity and renew inflationary pressure," said Peter Cardillo, chief strategist, senior vice president and market analyst, S.W. Bach & Co. "That could put into question if and when the Fed will end its tightening cycle."