Stocks fall sharply as oil prices surge
NEW YORK » Wall Street tumbled yesterday as oil prices rebounded, fanning concerns that inflation will further pinch consumers and lead central banks to raise interest rates. The Dow Jones industrial average fell more than 200 points to its lowest close since mid-March.
Investors are uneasy about oil prices, which yesterday traded as high as $138.30 a barrel on the New York Mercantile Exchange before settling up $5.07 at $136.38. Having breached $139 a barrel last week, record-high crude has increasingly posed both an inflationary risk and a threat to growth.
Energy Department data released yesterday showed that gasoline supplies grew last week but that crude oil inventories fell more than analysts expected. The weekly report suggested no letup in U.S. energy demand, even as consumers adjust their budgets to accommodate gasoline that averages more than $4 a gallon nationally.
The Federal Reserve's Beige Book, which provides readings on the U.S. economy by region and arrives two weeks before the Fed's next meeting, indicated that Americans are straining under rising energy and food costs. The Fed said the economy remains "generally weak."
The findings seemed to confirm many of Wall Street's concerns.
"That certainly was not unexpected," said Janna Sampson, director of portfolio management at Oakbrook Investments. "Obviously, I don't know that the market likes hearing that, slowing spending or slowing growth and inflation at the same time."
The Dow fell 205.99, or 1.68 percent, to 12,083.77. Yesterday's close was the lowest for the blue chips since March 17, when the Dow ended at 11,972.25.
The biggest loser among the 30 Dow components was Alcoa Inc., which fell $3.40, or 8 percent, to $39.32 after a JPMorgan analyst said the aluminum producer is not planning to sell itself or spin off part of its business.
The Standard & Poor's 500 index fell 22.95, or 1.69 percent, to 1,335.49, and the Nasdaq composite index fell 54.93, or 2.24 percent, to 2,394.01.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.07 percent from 4.11 percent late Tuesday.
The dollar fell against other major currencies, while gold prices rose.
The Russell 2000 index of small companies fell 14.74, or 2.01 percent, to 717.88.
Declining issues outnumbered advancers by more than 4 to 1 on the New York Stock Exchange, where volume came to 1.39 billion shares compared with 1.37 billion shares traded yesterday.
In corporate news, Corporate Express NV, the Dutch office supplies distributor, accepted a sweetened $2.7 billion buyout bid from U.S. office supplies retailer Staples Inc. Staples rose $1.23, or 5.3 percent, to $24.38.
Lehman Brothers Holdings Inc. fell for the fourth straight session. The company reported earlier this week that it lost more than $2.8 billion for the fiscal second quarter ended May 31 and announced plans to raise $6 billion in capital to help its balance sheet. The stock declined $3.75, or 13.6 percent, to $23.75.