Stocks swing lower in nervous trading
NEW YORK » Stocks plunged yesterday as a broker's downgrade of Dell Inc. and higher oil prices aggravated Wall Street's worries about a shaky start to second-quarter earnings. The Dow Jones industrial average sank more than 121 points.
An analyst's reduced outlook for Dell drove concerns about the impact of a slowing economy on tech companies, whose shares led the broader market lower and gave the Nasdaq composite index its biggest one-day drop in a month. Meanwhile, rising oil prices intensified the market's inflation jitters.
"We're not out of the inflation woods yet," said Sam Stovall, chief investment strategist with Standard & Poor's U.S. equity research.
The Energy Department reported that oil inventories dropped by a larger-than-expected amount last week. The news sent crude oil futures up 79 cents a barrel to settle at $74.95 on the New York Mercantile Exchange.
Yesterday's slump was another in the recent string of wildly erratic sessions on Wall Street. Investors have been cautious about trading amid fears that rising energy prices could bring more interest rate hikes at a time when the economy already appears to be cooling off.
At the close, the Dow tumbled 121.59, or 1.09 percent, to 11,013.18. The Dow lost almost 139 points earlier.
Broader stock indicators also dropped sharply. The S&P 500 index fell 13.92, or 1.09 percent, to 1,258.60, and the Nasdaq fell 38.62, or 1.81 percent, to 2,090.24.
Decliners led advancers by more than 2 to 1 on the New York Stock Exchange.
Elsewhere, the U.S. dollar was higher against the Japanese yen and barely changed versus European currencies. Gold prices rose to more than $650 an ounce.
After months of intensive focus on the Federal Reserve's interest rate policy, traders have reached a consensus that the central bank will raise rates again when it meets in August.
"We've been totally driven by what the Fed's going to do, but it looks like we've lost that leader," said Scott Merritt, a U.S. equity strategist for JPMorgan Asset Management. "Now it's almost a foregone conclusion that the Fed is done after August and people are trying to find something else to focus on."
The result, he said, is a focus on the "data du jour" -- anything from oil prices to inflation data -- which can send stocks swinging wildly. Moreover, investors are highly sensitive to any signs that higher interest rates and inflation are hurting profits.
The market is in a "decision box," said Rod Smyth, chief investment strategist, Wachovia Securities.