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Oil fears overshadow
positive earnings
NEW YORK » Soaring oil prices trumped positive earnings news yesterday, sending stocks skidding as investors rushed to take profits on new fears that the market is in the midst of a commodities bubble.
Stronger than expected profits at chip bellwether Intel Corp. and an upbeat outlook from McDonald's Corp. cheered Wall Street early in the session. But rising crude prices squashed those gains as oil traders nervously handicapped weekly inventory numbers due today.
Anticipation of today's report on weekly jobless claims also spooked buyers -- particularly following disappointing employment data for September released last Friday. That, combined with surging energy costs and worries about decelerating earnings, contributed to an apprehensive climate on Wall Street.
"There is so much uncertainty in the market right now, and it is playing itself out as fear: The fear of being overcommitted to stocks," said Ken Tower, chief market strategist for Schwab's CyberTrader. "We've also seen a lot of recent sentiment data that suggests there is a real short-term consensus opinion that the market is headed lower. So there's tremendous uncertainty, and uncertainty and anxiety are the enemies of a bull market."
The Dow Jones industrial average slumped 74.85, or 0.74 percent, to 10,002.33.
Broader stock indicators were also lower. The Standard & Poor's 500 index declined 8.19, or 0.73 percent, to 1,113.65. The Nasdaq composite index shed 4.64, or 0.24 percent, to 1,920.53, propped up somewhat by strength in the semiconductor industry.
Crude oil futures opened lower, a day after trading above $54 per barrel, raising hopes for a better economic picture by year's end. But as oil traders became less bullish about U.S. inventories and worries grew about Hurricane Ivan's lingering impact on production in the Gulf of Mexico, prices began to soar. Light, sweet crude for November delivery surged $1.13 to settle at $53.64 per barrel on the New York Mercantile Exchange.
Even as oil rallied, however, commodity-dependent stocks foundered, pressuring blue chips. On the Dow, Alcoa Inc., the world's largest aluminum producer, lost $1.00 to $32.19, and Exxon Mobil Corp. closed down 89 cents at $48.48. Other energy stocks also suffered: Chevron Texaco Corp. shed $1.16 to $53.31 and Occidental Petroleum Corp. lost 3.6 percent, or $2.04, to $54.91.
Analysts blamed the declines on growing fears about a possible bubble in commodities prices, and worries that they were due for a correction soon in the face of slowing global demand, particularly in China, and cooling economic growth at home. With oil prices up 60 percent so far this year, the thinking went, how much further can they go?
"There is a sense here that we've gone too far, too fast in the commodity stocks ... and that spills over into the big industrials," said Larry Wachtel, market analyst with Wachovia Securities.
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