Wall Street retrenched yesterday as the trade deficit widened and oil prices surged, while a weak quarterly report from Dell also disheartened...
NEW YORK — Wall Street retrenched yesterday as the trade deficit widened and oil prices surged, while a weak quarterly report from Dell also disheartened the market. The major indexes ended the week mixed.
The Dow Jones industrial average dropped 85.58 to 10,600.31, after rising 91.48 Thursday.
Microsoft, one of the 30 Dow stocks, slipped 22 cents yesterday to close at $27.05 a share and off 2.6 percent for the week. Boeing, also a Dow stock, fell 77 cents yesterday to $66.54, but edged up 0.5 percent for the week.
Broader stock indicators also sagged yesterday. The Standard & Poor’s 500 index fell 7.42 to 1,230.39, and the tech-focused Nasdaq composite index dropped 17.65 to 2,156.90.
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The major indexes ended the week mixed. The Dow closed the week up 0.4 percent, the S&P 500 rose 0.3 percent and the Nasdaq dropped 1 percent.
Crude-oil futures hit new records on reports of U.S. refinery outages. A barrel of light crude closed at $66.86, up $1.06, on the New York Mercantile Exchange.
Traders were displeased when the Commerce Department reported yesterday that the trade deficit, the imbalance between what America sells abroad and what it imports, is running higher than last year’s all-time record. The trade deficit rose to $58.8 billion in June, an increase of 6.1 percent from the May deficit of $55.4 billion.
More than half the deterioration in June reflected America’s surging foreign-oil bill, which hit a record high of $19.9 billion, an increase of almost 10 percent from May. Analysts say climbing oil prices will send that figure higher in coming months.
In company news, a rare disappointment from Dell sent its stock sharply lower and sparked selling in other tech stocks. Its second-quarter revenue was nearly $300 million below analysts’ forecast and its third-quarter outlook was also well below projections. And McDonald’s fell after soaring Thursday on speculation a real-estate company is eyeing its store locations and other property.
The market swung skittishly throughout the week as oil hit record highs, the Federal Reserve raised interest rates for the 10th time in more than a year and the government released a mix of data that showed the economy continues to grow at a healthy clip.
“The volatility we’re seeing has nothing to do with investors; it has everything to do with traders,” said Sandy Lincoln, chief market strategist at Wayne Hummer Asset Management. “Investors are thinking two, three, four, five or 10 years out. Traders are thinking two, four, five or 10 hours out.”
The market has been watching oil prices obsessively, afraid that higher energy costs could lower consumer spending and increase business expenses. The fear is that higher oil prices, coupled with the Fed’s streak of interest-rate hikes, could plunge the economy into a recession.
“The Fed raising interest rates at the same time oil is going up is like pumping the brakes twice,” said Stephen Wood, portfolio strategist at Russell Investment Group. “If the Fed is raising rates, they will be successful in slowing down the economy. It will happen; it’s like the law of gravity.”
There are hints that those fears may be realized. Almost two-thirds of those surveyed for an Associated Press-AOL poll expect fuel costs will cause them financial hardship in coming months, while in April, only half felt that way. The average price of a gallon of regular gasoline was more than $2.40 per gallon at week’s end, compared with $1.86 a year ago, according to auto club AAA.
Dell’s report, after the close of regular trading Thursday, sent the stock down $2.94 to $36.64. Its revenues dropped because prices for low-end computers “really have dipped very, very low, and our teams were just too aggressive in following that down,” CEO Kevin Rollins said.