Rising oil prices drive down stocks
NEW YORK » Surging gold and energy prices dragged stocks lower yesterday as inflation fears curbed Wall Street's enthusiasm over solid first-quarter earnings from financial services firm Citigroup Inc.
Although Citigroup's upbeat results fed optimism about corporate earnings for the latest quarter, investors again focused on inflation and interest rates after comments from Federal Reserve Bank of Chicago President Michael Moskow indicated he felt the central bank must remain "vigilant" with its policy of boosting rates to stem price increases.
Without new data to gauge the economy's health and only a handful of earnings reports, Wall Street turned its attention to the commodities markets, where oil prices topped $70 a barrel and gold lingered at a 25-year high. But despite the threat of rising raw material costs, the inflation picture has remained somewhat positive recently, said Russ Koesterich, portfolio manager at Barclays Global Investments.
"Core inflation (excluding volatile energy and food prices) has stayed relatively contained," Koesterich said, adding that this week's reports on wholesale and consumer inflation should indicate where prices are increasing and draw a reaction from Wall Street.
At the close of trading, the Dow Jones industrial average dropped 63.87, or 0.57 percent, to 11,073.78, after opening the day in positive territory. The Dow is at its lowest level since closing at 10,972.28 on March 9.
Broader stock indicators were also lower. The Standard & Poor's 500 index fell 3.79, or 0.29 percent, to 1,285.33, and the Nasdaq composite index sank 14.95, or 0.64 percent, to 2,311.16.
The market shifted at midday and had declining issues ahead of advancers by 6 to 5 on the New York Stock Exchange, where consolidated volume of 1.87 billion shares lagged the 1.95 billion shares that changed hands Thursday. The markets were closed Friday in observance of Good Friday.
The Russell 2000 index of smaller companies declined 1.64, or 0.22 percent, to 749.47.
Bonds rebounded from last week's slide, with the yield on the 10-year Treasury note slipping to 5.01 percent from 5.05 percent late Thursday. The dollar was mixed against other major currencies, and gold prices soared past $600 an ounce.
Political tension in Iran and Nigeria and concerns about shrinking U.S. gasoline reserves drove crude futures to their highest levels since hurricanes shut down much of Gulf Coast production late last summer. A barrel of light crude jumped $1.08 to settle at $70.40 on the New York Mercantile Exchange, where gasoline climbed 6.1 cents to $2.170 a gallon.