Stocks sag as oil prices steam higher
With the much-ballyhooed initial public offering of Google Inc. behind them and oil chugging to a new record high, investors took a step back today, sending stocks lower.
The downward trend underscored that the equity market is deeply mired in the trading doldrums characteristic of late summer, though analysts noted there are additional pressures this year.
Fears that the Olympics in Athens or the upcoming Republican convention in New York might be targets of terrorism have kept an unusual number of investors on the sidelines, and oil prices aren’t helping, said Janna Sampson, director of portfolio management at Oakbrook Investments.
“People are thinking there is just no good reason to take on this risk,” Sampson said. “I know I’ve got clients who are telling me they have money but they’re waiting until after these things are over. And we don’t often see institutional investors holding up for events.”
According to preliminary results, the Dow Jones industrial average declined 42.33, or 0.4%, to 10,040.82.
The broader gauges were also lower. The Nasdaq composite index fell 11.48, or 0.6%, to 1,819.89. The Standard & Poor’s 500 index was down 3.94, or 0.4%, at 1,091.23.
Oil prices soared 1.48 to 48.75 on the New York Mercantile Exchange, despite assurances from Iraq that it would resume full exports from its southern terminals.
Further rattling traders, a radical Iraqi cleric rejected an offer to peacefully end his militia group’s two-week-old standoff in the holy city of Najaf.
In economic news, the number of Americans filing new claims for unemployment benefits fell for a third consecutive week, suggesting improvements in the labour market after a rough patch earlier this summer.
But analysts pointed out that the figures do not include the impact of Hurricane Charley, which will be reflected in next week’s data.
Separately, a measure of future economic activity fell in July for the second consecutive month, reinforcing other data that indicates the recovery is slowing.
The decline in the Conference Board’s Index of Leading Economic Indicators reflects growing concerns about rising costs for energy and food, as well as worries about future economic growth.
In addition to energy prices, which have raised worries about inflation and the prospect of corporate earnings growth in the second half, weaker forecasts from software companies have weighed heavily on the market.
With many shares oversold after weeks of sluggish trading, the bounce seen during the previous four sessions could simply have been a counter rally, analysts said.
“Some of the market’s bellwethers are technology issues, and they’re very sensitive to the economy,” said Steven Goldman, chief market strategist with Weeden & Co. in Greenwich, Connecticut.
“If there is a shadow of doubt, investors become risk-averse. And tech stocks have a very difficult time in an uncertain environment.”
Google, which set its final IPO price at 85 late Wednesday – far lower than previously forecast – began trading shortly before noon, and closed up 15.34 at 100.34.
Other search engines, closely watched as Google comes to market, posted declines: Yahoo! Inc. was down 37 cents at 28.11 and Ask Jeeves Inc. fell 4 cents to 26.04.
Amazon.com Inc. was down 73 cents at 38.63 after announcing plans to buy China’s largest online retailer, Joyo.com Ltd., a deal valued at 75 million. Joyo.com, which sells books, movies, music and gifts, has an estimated 80 million customers.
Delta Air Lines shed a penny to 4.06 after the struggling carrier said more job cuts are ahead as it tries to avoid bankruptcy court. High wages and rising fuel costs have hurt the nation’s third-largest carrier, which has faced stiff competition from low-fare airlines.
Canadian telecom equipment giant Nortel Networks Corp. added 14 cents to 3.74 after it announced plans to slash its work force by 10% as it struggles to recover from an accounting scandal.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange. Volume was light.
The Russell 2000 index, which tracks smaller company stocks, was down 4.17, or 0.8%, at 537.44.
