U.S. stocks end at session lows; crude pushes $50
Monday September 27, 4:28 pm ET
By Susan Lerner
NEW YORK (CBS.MW) - Stocks tumbled Monday as crude futures soared to all-time highs and bearish broker calls on semiconductors and communications equipment stocks put added pressure on the technology sector.
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Crude-oil futures closed above $49 a barrel, marking fresh uncharted territory in New York as production shutdowns from hurricanes in the Gulf of Mexico and unrest in Nigeria exacerbated concerns about tight supplies.
November crude moved as high as $49.75 a barrel on the New York Mercantile Exchange, topping the record intraday level of $49.40 seen on Aug. 20 before closing up 76 cents at $49.64 -- the first close above $49 in the 21-year history of crude futures trading on the exchange. See Futures Movers.
"We seem to be recoupled to oil again today," said Stephen Sachs, head of Trading at Rydex Investments. "If oil hangs around $49 or $50 for very long I think it could get ugly pretty quickly."
The major indexes closed at session lows, with the Dow Jones Industrial Average (^DJI - News) finishing below the 10,000 mark for the first time since Aug. 17. The blue chip gauge slumped 58.70 points, or 0.6 percent, to close at 9,988.54.
The Nasdaq Composite Index (NasdaqSC:^IXIC - News) ended the day down 19.60 points, or 1 percent, at 1,859.88 while the S&P 500 (CBOE:^SPX - News) dropped 6.59 points, or 0.6 percent, to 1,103.52.
Decliners outnumbered advancers by a 21-to-12 margin on the New York Stock Exchange and by 11-to-4 on the Nasdaq. Big Board volume was about 1.26 billion shares, while some 1.31 billion shares traded on the Nasdaq.
All but four Dow stocks finished in the red led by a 1.6 percent slide in JPMorgan Chase (NYSE:JPM - News) . The bank's JPMorgan Fleming Asset & Wealth Management said it will buy a majority stake in hedge fund manager Highbridge Capital Management. Read more.
Other big blue chip decliners included American Express (NYSE:AXP - News) , Citigroup (NYSE:C - News) , Boeing (NYSE:BA - News) , Verizon Communications (NYSE:VZ - News) , 3M (NYSE:MMM - News) and Walt Disney (NYSE:DIS - News) - all down more than 1 percent on the day.
Alcoa (NYSE:AA - News) , ExxonMobil (NYSE:XOM - News) , McDonald's (NYSE:MCD - News) and Merck (NYSE:MRK - News) were the only Dow advancers.
Besides the concerns over crude, said Michael Metz, chief investment strategist at Oppenheimer & Co., markets are facing "a lot of random noise" as the third quarter winds down this week.
"A lot of portfolio managers are biting the bullet and selling their losers, and I think they're preferring to go into cash rather than committing themselves elsewhere," he said.
With the oil situation still "unnerving" and markets remaining "accident-prone" as far as earnings are concerned, Metz said there was no reason right now to get aggressive on the buy side.
Phil Dow, director of equity strategy at RBC Dain Rauscher, concurred.
"My guess is that the week is going to be one where you don't expect a whole lot and probably don't get a whole lot. I think the key here is holding on for the next major catalyst," said Dow, who expects the market will do better later this year and into 2005.
A number of calls from the brokers also influenced Monday's trading.
Dow stock Wal-Mart Stores (NYSE:WMT - News) , which had risen after being upgraded to "buy" from "neutral" at Banc of America in a valuation call, gave up its gains and closed down 0.6 percent. See The Ratings Game.
Fellow blue chip Coca-Cola (NYSE:KO - News) fell 0.9 percent. Credit Suisse First Boston cut its 2005 earnings outlook for the soft-drink giant but Alcoa rose 0.4 percent after Smith Barney raised its estimates for the miners and said aluminum fundamentals were turning positive.
Morgan Stanley, meanwhile, lowered its rating on the semiconductor sector to "in line" from "attractive," due to expectations for a sharp deceleration in revenue growth in the industry and for a significant number of third-quarter earnings warnings from chip companies.
The Philadelphia Semiconductor Index (Philadelphia:^SOXX - News) fell 1.5 percent, while Dow component Intel (NasdaqNM:INTC - News) lost 0.9 percent.
Elsewhere in the tech sector, Prudential went "neutral" on the communications-equipment sector and sliced Nortel Networks (NYSE:NT - News) , saying its business momentum appears to have stalled in 2004. Nortel's shares lost 4.4 percent.
The broker also said its own checks regarding business at Lucent Technologies (NYSE:LU - News) "suggest that the company is tracking toward revenues of slightly over $2.2 billion for fiscal fourth quarter," as opposed to the average analyst forecast as polled Thomson First Call of just less than $2.3 billion. Lucent's shares dropped 2.2 percent. See Silicon Stocks.
And J.P. Morgan realigned its ratings on a number of smaller names in the airline sector, upgrading ExpressJet (NYSE:XJT - News) , Pinnacle Airlines (NasdaqNM:PNCL - News) and SkyWest (NasdaqNM:SKYW - News) but downgrading AirTran (NYSE:AAI - News) , Frontier (NasdaqNM:FRNT - News) and JetBlue (NasdaqNM:JBLU - News) . The Amex Airlines Index stumbled 4 percent. See Market Focus.
In other news, Tommy Hilfiger (NYSE:TOM - News) skidded 22 percent to $10.30 after the company disclosed that a grand jury was looking into the buying-office commissions the retailer pays to a non-U.S. subsidiary. See Screamers.
U.S. Treasurys retained their early, oil-related gains. The benchmark 10-year note closed 8/32 higher at 102 to yield (CBOE:^TNX - News) 4, after ticking below the 4 percent mark earlier.
December gold futures prices closed up $1 at $410.70 an ounce on the Nymex. See Metals Stocks.
The U.S. dollar was down 0.1 percent against the euro at $1.2290 but moved up 0.5 percent against the Japanese yen at 111.30 yen. See Currencies.
