Posted at 11:43 a.m., Tuesday, January 17, 2006
Stocks drop as oil tops $66 a barrel
Associated PressNEW YORK Stocks skidded today as oil prices rose past $66 a barrel and Wells Fargo & Co. and other bank earnings disappointed the market.
U.S. investors sold off equities as crude oil futures soared after an attack on an oil platform in Nigeria, the fifth largest oil exporter to the United States. A barrel of light crude settled at a three-and-a-half month high of $66.31, up $2.39, in trading on the New York Mercantile Exchange.
Oil prices have been creeping higher for weeks but today's "sharp, violent rise" bit into stocks as investors consolidated gains from the first weeks of January, said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn.
Disappointing bank earnings also spurred selling. Wells Fargo missed analysts' expectations, saying a spike in personal bankruptcies in the fourth quarter hurt its results. Cincinnati-based Fifth Third Bancorp said its margins are narrowing and its net interest income fell 2 percent from the year-ago period.
Falling international markets also troubled U.S. investors. Japan's main stock index fell 2.84 percent, its biggest loss in nearly two years, after Tokyo-based Internet company Livedoor Co. was raided yesterday evening over suspected securities violations. The news sparked a selloff of other Internet companies and pushed down auto and electronics stocks. Other international markets also dropped today.
According to preliminary calculations, the Dow Jones industrial average fell 63.55, or 0.58 percent, to 10,896.32.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 4.68, or 0.36 percent, to 1,282.93, and the Nasdaq composite index lost 14.35, or 0.62 percent, to 2,302.69.
Bonds rose, with the yield on the 10-year Treasury note falling to 4.34 percent, down from 4.36 percent late Friday. U.S. markets were closed yesterday for the Martin Luther King holiday. The U.S. dollar rose against other major currencies in European trading. Gold prices were lower.
All the major indexes had a strong start to 2006, hitting 4 1/2-year highs in the first two weeks of trading after minutes from the most recent meeting of Federal Reserve policy makers showed the central bank's views on inflation were more moderate. Many investors took the minutes as a sign that the Fed's 18-month streak of short-term interest rate hikes was nearing its end.
More recently, trading has been choppy as investors reacted strongly to oil price increases or any hint of weak earnings.
"If oil continues to stay at these levels for a sustained period, it will bite into economic activity and renew inflationary pressure," said Peter Cardillo, chief strategist, senior vice president and market analyst, S.W. Bach & Co. "That could put into question if and when the Fed will end its tightening cycle."
In company news, US Bancorp, the nation's sixth-largest bank by assets, fell 56 cents to $30.03 after its fourth-quarter results met analysts' expectations. Wells Fargo, the nation's fifth-largest bank, fell 65 cents to $62.60; Fifth Third fell 49 cents to $38.44.
Continental Airlines Inc. fell $2.23 to $17.24 after it posted a narrower fourth-quarter loss, despite sharply higher fuel costs. For the full year 2005, Houston-based Continental posted a loss of $68 million, or 97 cents per share, versus a loss of $409 million, or $6.25 per share, a year ago.
McDonald's Corp. rose 12 cents to $34.59 after it said same-store sales, or sales at restaurants open at least one year, rose 5 percent in December on stronger sales of breakfast items in the United States and increasing sales abroad. The company also gave a fourth-quarter earnings outlook that is higher than analysts' expectations.
Medical device maker Boston Scientific Corp. raised its offer for heart device maker Guidant Corp. to about $27 billion, its latest salvo in the bidding war between it and Johnson & Johnson. The new offer comes after Guidant accepted J&J's $24.2 billion offer Friday, which the Indianapolis company chose over Boston Scientific's previous $25 billion bid. Guidant has said the J&J deal has a better chance of closing sooner. Guidant rose $5.38 to $76.22; Boston Scientific fell $1.30 to $23.90 and J&J fell 54 cents to $61.28.
The Russell 2000 index of smaller companies fell 4.82, or 0.68 percent, to 703.62.
Declining issues led advancers by nearly 2 to 1 on the New York Stock Exchange where volume was 1.65 billion, up from 1.57 billion at the same time Friday.
Overseas, Britain's FTSE 100 fell 0.72 percent, Germany's DAX index lost 0.99 percent, and France's CAC-40 dropped 1.01 percent.