Investors continue
to fret over energy

NEW YORK » Oil worries and a raft of economic uncertainties plagued Wall Street yesterday, sending stocks lower as investors collected profits after the strong gains of the previous two sessions.

Oil prices edged higher after a report said 60 percent of oil production in the Gulf of Mexico remains shut due to damage by Hurricane Katrina.

An inventory report from the Energy Department showed the nation's oil and gasoline stockpiles fell considerably, although the losses were less than Wall Street expected. A barrel of light crude settled at $64.49, up 12 cents, on the New York Mercantile Exchange.

With oil remaining in the mid-$60 per barrel range, investors were concerned that both corporate earnings and consumer spending would drop due to high energy costs. Investors also worried that the Federal Reserve would continue to raise interest rates at its Sept. 20 meeting. Despite Katrina's devastation and death toll, the harm to the U.S. economy was less than originally expected, and hopes of a halt in rate hikes dimmed.

"I think the Fed's in a box here, and they really don't have a choice but to raise rates," said Michael Chren, portfolio manager for the Allegiant Funds. "Rebuilding from the hurricane will be an economic positive next year, you have concerns about inflation, and you have the housing bubble. I don't think they can stop."

The Dow Jones industrial average fell 37.57, or 0.35 percent, to 10,595.93. The Dow had gained 186.13 in the previous two sessions.

Broader stock indicators also lost ground. The Standard & Poor's 500 index slid 4.69, or 0.38 percent, to 1,231.67, and the Nasdaq composite index dropped 6, or 0.28 percent, to 2,166.03.

Investors' preoccupation with oil and interest rates caused them to look past a surprising drop in first-time jobless claims. More claims are expected in the coming weeks from workers displaced by the Gulf Coast disaster.

In company news, eBay Inc. shares fell $1.53 to $38.93 after newspaper reports had the online auction company in talks to acquire Swedish firm Skype Technologies SA, which creates software to allow free phone calls over the Internet, for $2 billion to $3 billion.

Sears Holdings Corp. shares tumbled $7.04 to $127.81 after the company's quarterly earnings missed Wall Street profit forecasts by 3 cents per share, due in part to restructuring costs. The company also named Alywin Lewis as its new chief executive, replacing Alan Lacy, who will remain vice chairman and a director of the retailer.