Wall Street pulls back as oil soars
NEW YORK » Wall Street sank yesterday as oil's surge above $108 a barrel and more worrisome signs for the financial sector led investors to extend last week's losses. The Dow Jones industrial average fell more than 150 points, bringing its three-day loss to nearly 515, while broader indexes showed steeper percentage losses.
Wall Street had no bleak economic data to contend with yesterday, but instead faced a steady drumbeat of negative news on companies exposed to mortgages.
Mortgage lenders dropped after Thornburg Mortgage Inc. was downgraded by a Jefferies & Co. analyst and Countrywide Financial Corp. was reported to be under investigation by the government for securities fraud.
Then, Bear Stearns Cos. dropped as Moody's Investors Service downgraded a batch of Bear securities backed by Alt-A mortgages, which are home loans given to people lacking proof of income or with minor credit problems.
The slew of downbeat financial news overshadowed a strong February sales report from McDonald's Corp., and led restless investors to proceed cautiously ahead of big economic reports later in the week: Thursday's report on retail sales and Friday's report on consumer prices.
Those two readings will give Wall Street a better idea of how much the average American is struggling with falling home values and rising costs, and how aggressively the Federal Reserve will need to act when it meets next week.
"The next three days, there aren't any set, big, market-moving reports," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "The economic data Thursday and Friday is going to be the last bit of news, the last showing, before seeing what the Fed will do on the 18th."
The Dow Jones industrial average fell 153.54, or 1.29 percent, to finish near the lows of the session at 11,740.15. It was the lowest close for the Dow since October 2006. The Standard & Poor's 500 index fell 20.00, or 1.55 percent, to 1,273.37, while the Nasdaq composite index fell 43.15, or 1.95 percent, to 2,169.34.
The Russell 2000 index of smaller companies fell 16.14, or 2.45 percent, to 643.97.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where consolidated volume came to 4.15 billion shares compared with 4.44 billion shares traded Friday.
The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.46 percent from 3.54 percent late Friday.
Investors appeared to shrug off an upbeat report from the Commerce Department that said U.S. wholesale inventories rose in January by 0.8 percent, more than expected, and that sales at U.S. wholesalers rose 2.7 percent, their widest jump since March 2004.
Recent record-breaking surges in commodities prices have worried many investors about whether the Federal Reserve might hesitate to lower key rates by as much as they want -- at least a half percentage point. Over the past few months, policy makers have cited the staggering economy as a greater risk than inflation.
Crude oil soared yesterday to finish at a record, rising $2.75 to $107.90 a barrel on the New York Mercantile Exchange after setting a trading record of $108.21 during the session. It was the fifth record set in the last six sessions.
Gold fell, while the dollar traded mixed.