Investors preoccupied with inflation extended Wall Street's decline yesterday, selling stocks sharply lower in response to a ballooning...
NEW YORK — Investors preoccupied with inflation extended Wall Street’s decline yesterday, selling stocks sharply lower in response to a ballooning U.S. trade deficit. The drop, which came in spite of a bullish sales outlook from Intel, left the market substantially lower for the week.
The Dow Jones industrial average fell 77.15 at 10,774.36.
Microsoft, one of the 30 Dow stocks, declined 34 cents yesterday to close at $25.09 a share, down 0.3 percent for the week. Boeing, also a Dow stock, fell 49 cents to $57.49, off 1.5 percent for the week.
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Broader stock indicators also moved sharply lower. The Standard & Poor’s 500 index was down 9.17 at 1,200.08, and the Nasdaq composite index lost 18.12 to 2,041.60.
Inflation worries dominated Wall Street this week, with higher oil prices prompting investors to cash in profits after the previous week’s strong gains. After the Dow came within 16 points of 11,000 on Monday, it fell more than 200 points by yesterday’s close. For the week, the Dow lost 1.52 percent, the S&P 500 slid 1.4 percent and the Nasdaq fell 1.8 percent.
Wall Street was unnerved as the Commerce Department reported that the trade deficit widened to $58.3 billion in January, the second-highest level after November’s record reading. While exports rose to record highs, imports rose even faster, leading investors to fear a loss of confidence in the dollar overseas. The dollar fell against most major currencies after the news came out.
The trade deficit sapped any momentum the market may have gained from Intel, a Dow stock, which reported late Thursday that sales for the current quarter would be at the higher end of previous forecasts.
That bodes well for the tech sector and the overall economy, but inflation fears overshadowed the announcement.
“The economy is fairly good. Consumers are spending money. There’s strength there,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “But with this trade deficit thing, the dollar, and oil prices where they are, the market’s going to need a little more convincing.”
The dollar slipped lower on news of the widening trade gap, giving back earlier gains against the euro and Japanese yen.
Oil futures spiked higher as the dollar slipped through the morning, climbing back above $54 per barrel.
A barrel of light crude settled at $54.43, up 89 cents, on the New York Mercantile Exchange.
“Oil prices are still hovering around their highs, the dollar continues to move lower — those are two factors that the market isn’t buying right now,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach. “So as we’ve seen with Intel, any good news we happen to get will be discounted while we figure out inflation.”