Oil prices fall sharply, sending stocks down
NEW YORK » Wall Street fell moderately yesterday in an erratic session dominated by worries about inflation -- which were somewhat soothed by a steep drop in the price of oil.
Light, sweet crude closed down $3.69, or 2.9 percent, to settle at $121.41 a barrel on the New York Mercantile Exchange after Tropical Storm Edouard seemed unlikely to threaten oil and natural gas facilities in the Gulf of Mexico. It was the lowest settlement price since May 5 and left crude down nearly 20 percent from its July 11 high of $147.27.
That decline eased some of investors' concerns about inflation. Wall Street initially sold off after the Commerce Department said an inflation gauge tied to consumer spending rose by a sharp 0.8 percent in June, reflecting higher gasoline prices. That was the biggest jump in the indicator since a 1 percent rise in February 1981.
The data came in the department's report on consumer spending, which fell 0.2 percent in June after removing the effects of higher prices. The increase in inflation offset some of the billions in dollars in checks sent to taxpayers as part of the government's economic stimulus plan.
The report fed investors' growing concerns about the impact of rising prices on consumers, whose spending is the lifeblood of the economy.
The Dow Jones industrial average fell 42.17, or 0.37 percent, to 11,284.15. The Dow had been down more than 100 points in early trading.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 11.30, or 0.90 percent, to 1,249.01, and the Nasdaq composite index declined 25.40, or 1.10 percent, to 2,285.56.
The Russell 2000 index of smaller companies fell 12.02, or 1.68 percent, to 704.14.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 1.23 billion shares.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.98 percent from 3.94 percent late Friday. The dollar rose against other major currencies, while gold prices fell.
Investors seemed unmoved by a Commerce Department report that orders to U.S. factory jumped at the fastest pace in six months in June. The report reflected increases in petroleum prices and heavy demand for military equipment. Orders rose by 1.7 percent in June, more than double what had been expected. It was the biggest gain since December.
Steven Goldman, chief market strategist at Weeden & Co., said the up-and-down trading since Wall Street's recent lows in July are part of a necessary process as the market searches for a bottom.
Meanwhile, U.S. corporate earnings reports for the second quarter were still arriving. Cisco Systems Inc., News Corp. and Procter & Gamble Co. all report earnings today.
Cisco fell ended unchanged at $21.99, News Corp. advanced 17 cents to $14.57 and P&G rose 87 cents to $65.82.