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Scuttled Yahoo Deal Adds to Stock Stress

Posted on: Tuesday, 6 May 2008, 06:00 CDT

By Matt Krantz

Stocks stumbled Monday after investors stressed over another jump in crude oil prices and the dissolution of Microsoft's bid for Yahoo.

While the price of oil surged $3.65 to a record close of $119.97, the Dow Jones industrial average sank 88.66 points to 12,969.54. The Dow is down 2.2% this year.

Hampered by stocks in the education services, thrifts and mortgage finance, and department store industries, the Standard & Poor's 500 index fell 6.41 points to 1407.49. The S&P 500 is down 4.1% this year.

And the tech-heavy Nasdaq composite index also fell, shedding 12.87 points to 2464.12. The Nasdaq is down 7.1% this year.

The spurt in oil prices served investors with another reminder that the stock market, despite a strong showing in April, still faces major headwinds, says Peter Cardillo of Avalon Partners.

And that's not a reminder investors need after pushing the S&P 500 up in April to near the pivotal 1400 level, says Todd Leone at Cowen.

But that's not to downplay the disappointment that there wasn't any kind of bidding war for Yahoo. Investors like to see buyers jockey for publicly traded companies as a sign there's value in the market. But with Yahoo, that validation wasn't there, Leone says.

So, investors saw it as a chance to step back. "We had a great April and just ran out of steam," he says.

Highlights: Yahoo shares fell $4.30, or 15%, after Microsoft said it was unable to find a suitable agreement to buy the Web company (stories, 1B, 2B). Microsoft fell 16 cents to $29.08.

*Continental Resources, an energy-exploration company, gained $7.14, or 16%, to $50.97. The company reported 60% higher quarterly profit of $88 million, or 52 cents a share, thanks to higher oil prices.

*Hewitt Associates dropped $4.48 to $37.42 after the human-resource service company reported net income of $44.5 million, or 43 cents a share, which was 259% higher than last year, but lower than expected.

*HMS Holdings, a provider of cost-recovery services, fell $6.11, or 23%, to $20.06. The company reported 7% higher profit of $3.2 million, or 12 cents a share, which missed expectations.

*Alpha Natural Resources gained $5.81 to $56.34. The coal seller reported 200% higher quarterly earnings of $25.5 million, or 39 cents a share. (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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