Stocks Fall As Oil Nears $50 Per Barrel
NEW YORK – A fresh surge in oil prices set a new trading record and threatened to push past $50 per barrel Monday, unnerving investors and sending stocks lower.
After setting a new all-time record settlement price of $48.88 on Friday, oil continued its march higher on Monday, creating new worries on Wall Street that the slowdown in profits and the economic recovery would extend through the end of the year due to high energy costs.
A barrel of light crude for November delivery was quoted at $49.60, up 72 cents, on the New York Mercantile Exchange. Prices reached $49.75 earlier in the session, marking the highest intraday trading level ever recorded.
In the first hour of trading, the Dow Jones industrial average fell 39.73, or 0.4 percent, to 10,007.51.
Broader stock indicators were moderately lower. The Standard & Poor’s 500 index was down 4.75, or 0.4 percent, at 1,105.36, and the Nasdaq composite index dropped 14.76, or 0.8 percent, to 1,864.72.
Oil producers and refiners still struggled to recover from Hurricane Ivan’s damage in the Gulf of Mexico, and global demand continues to tighten, analysts said, making the markets susceptible to even minimal losses in overall production.
And if prices rise at the gas pump, investors worried that consumer spending might be pared back just as retailers prepare for the holiday shopping season. The fear is that businesses will have to pay more to get their goods to market and, due to low demand, cannot pass the higher costs onto the consumer.
The Commerce Department reported that new home sales rose 9.4 percent to 1.184 million units in August, a higher figure than economists had forecast. While overshadowed by the oil situation, the good news showed that consumers were still willing to make big purchases even as the economy has slowed.
In corporate news, mortgage giant Fannie Mae climbed $1.28 to $66.79 after striking a deal with regulators in which the company agreed to investigate its top management, including its chief financial officer, and raise additional capital. Morgan Stanley downgraded Fannie Mae to “underweight” from “overweight” due to the investigation.
Wal-Mart Stores Inc. was upgraded to “buy” from “neutral” by Banc of America, which said the recent selloff in the company’s shares, combined with promising profit potential, made the stock attractive. Wal-Mart gained 49 cents to $53.30.
Walgreen Co. rose 42 cents to $36.68 after announcing that its profit rose 18.1 percent in the fourth quarter, beating quarterly estimates by a penny per share, thanks to higher prescription sales.
J.P. Morgan Chase & Co. said Monday it would purchase Highbridge Capital Management, a major hedge fund, for about $1 billion, according to media reports. J.P. Morgan Chase slipped 20 cents to $39.55.
Tommy Hilfiger Corp., which announced it is under investigation for its accounting practices, was downgraded to “underweight” from “overweight” by Prudential Equity Group. The clothier was down $2.87 at $10.30.
Declining issues outnumbered advancers by nearly 5 to 2 on the New York Stock Exchange, where volume came to 154.91 million shares, compared with 136.2 million at the same point Friday.
The Russell 2000 index of smaller companies was down 5.81, or 1 percent, to 560.16.
Overseas, Japan’s Nikkei stock average fell 0.3 percent. In afternoon trading, Britain’s FTSE 100 was down 0.9 percent, Germany’s DAX index tumbled 1.2 percent, and France’s CAC-40 was dropped 0.7 percent.
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