Stocks fell for a third-straight session yesterday as oil prices soared to record highs after the U.S. embassy in Saudi Arabia said it...
NEW YORK — Stocks fell for a third-straight session yesterday as oil prices soared to record highs after the U.S. embassy in Saudi Arabia said it would be closed for two days because of security threats.
The Dow Jones industrial average fell 21.10 to 10,536.93. The Dow has lost 160.66 since Thursday.
Microsoft, one of the 30 Dow stocks, fell 63 cents to close at $27.13 a share. Boeing, also a Dow stock, slipped 20 cents to $65.99.
Broader stock indicators also declined. The Standard & Poor’s 500 index slid 3.29 to 1,223.13, and the Nasdaq composite index dropped 13.52 to 2,164.39.
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Wall Street retreated after crude prices jumped $1.63 to settle at a record $63.94 a barrel on the New York Mercantile Exchange (NYMEX) after the U.S. embassy’s warning that there was a “threat against U.S. government buildings in the kingdom.” It was the second alert from the embassy in two weeks.
Meanwhile, gasoline futures also hit a record high of $1.86 per gallon on the NYMEX, adding to the market’s gloom with heightened fears of a slowdown in consumer spending.
“Two things are primarily at work: Oil prices are higher than people would like and we’re seeing a little profit taking,” said Joseph Lisanti, editor of Standard & Poor’s weekly newsletter, The Outlook. “We had a 3.6 percent rise in the S&P 500 in July. It was the best July since 1997, better than two-thirds of all Julys since 1928.”
Before oil surged, acquisition news catapulted stocks in the opening minutes of trading. E-Trade Financial and Quest Diagnostics said they are buying rivals in deals worth more than $1.6 billion combined, and a British newspaper reported that Cisco Systems may bid for cellphone maker Nokia.
Investors also were worried about today’s meeting of Federal Reserve policymakers, who are expected to raise the short-term federal-funds rate by a quarter percentage point to 3.5 percent — the 10th increase since last summer.
Bonds fell, with the yield on the 10-year Treasury note at 4.42 percent, up from 4.39 percent Friday, the highest level since April. The U.S. dollar was flat against the euro, as gold prices moved slightly lower.
Wall Street will be watching closely today for changes to the Fed’s policy statement indicating it will step up its tightening regime. A policy change is unlikely, but analysts are split between those who feel the Fed’s rate increases have been too aggressive and those who think the central bank isn’t doing enough to stave off inflation.
“It isn’t that the Fed strategy isn’t clear, but it’s whether the Fed strategy will work,” said John Waterman, chief investment officer at Rittenhouse Asset Management.
Stock in companies with announced deals climbed, with E-Trade rising $1.24 to $16.10, and Quest up $1.71 at $49.21. Quest, the nation’s top provider of medical tests, said it is planning to acquire LabOne in a $934 million deal that will expand Quest’s share of the testing market. E-Trade will buy Harrisdirect for $700 million.
The possibility of a deal involving Cisco and Nokia was reported by British newspaper The Business, which said technology infrastructure company Cisco is considering buying a wireless company, and that Nokia had been identified as the most likely target. Cisco lost 4 cents to $19.25; Nokia rose 14 cents to $16.08.
“The acquisition story helps get investors more invested in stocks and interested in stocks,” Waterman said. “There’s a lot of investors sitting on the sidelines now, particularly retail investors.”
Oil and gas producer Kerr-McGee rose $3.03 to $85.01 after it struck a deal to sell its North Sea oil assets for about $3.5 billion.
Danish shipping giant A.P. Moller-Maersk is buying the majority of Kerr-McGee’s North Sea oil assets for $2.95 billion. Britain’s Centrica is buying four other fields from Kerr-McGree for $566 million.