Plunge brings 2-day Dow decline to 288
NEW YORK » Stocks plunged for a second straight session yesterday as Wall Street battled a storm of negative factors -- soaring oil prices, interest rate jitters and a slowing economy. The Dow Jones industrial average dropped almost 167 points, bringing its two-day loss to 288.
Escalating tension in the Middle East carried oil near $77 a barrel, which compounded worries over Merrill Lynch's warning that higher lending rates and gasoline prices would likely pressure consumer spending at Wal-Mart Stores Inc. SAP AG rattled investors further after reporting weak software sales last quarter.
Many on Wall Street feared that the day's headlines signaled a worst-case scenario. Continued gains in energy prices could prompt the Federal Reserve to keep lifting interest rates to contain inflation, but the recent spate of downbeat earnings news suggested that economic growth was already moderating. Investors fear higher rates in a cooling economy could lead to a recession.
"At this point in the cycle, you have questions about how much inflation is rising, what the Fed will do and how much growth will slow," said Scott Wren, senior equity strategist at A.G. Edwards & Sons. "That's a debate that's going to be worked out over time. If you're going to buy stocks, you have to take a stance" on where those numbers are headed.
At the close of trading, the Dow slid 166.89, or 1.52 percent, to 10,846.29. On Wednesday, the blue-chip index sank 121 points.
Broader stock indicators declined. The Standard & Poor's 500 index lost 16.31, or 1.3 percent, to 1,242.29; the Nasdaq composite index dropped 36.13, or 1.73 percent, to 2,054.11, its lowest level since last October.
Declining issues led advancers by more than 3 to 1 on the New York Stock Exchange.
Bonds edged higher, with the yield on the 10-year Treasury note dropping to 5.08 percent from 5.1 percent late Wednesday. The U.S. dollar fell against the Japanese yen; gold prices climbed to about $660 an ounce.
Crude futures soared to a record close amid new Israeli attacks on Lebanese bases and Iran's hard-line stance on its nuclear program. A barrel of light crude gained $1.75 to settle at $76.70 on the New York Mercantile Exchange.
Although consumers and businesses have so far appeared to weather the persistently high price of oil, an uneasy start to second-quarter earnings has investors nervous about a potential downturn in the economy. Analysts, however, have insisted that the economy remains sturdy and that the market's pessimism is overdone.