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Dow Drops 123 As Crude Weighs on Stocks
Friday June 24, 10:31 pm ET
By Michael J. Martinez, AP Business Writer
Dow Drops 123, Nasdaq Loses 17 on Concerns That Energy Costs Will Eat Into Corporate Profits


NEW YORK (AP) -- Rising oil prices plagued Wall Street again Friday as the Dow Jones industrial average suffered its second straight 100-point-plus loss, ending a week dominated by concerns that energy costs would soon eat into corporate profits. All three indexes finished the week substantially lower.
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The Dow Jones industrial average fell 123.60, or 1.19 percent, to 10,297.84, after plunging more than 166 points the previous session.

The broader gauges, which also posted big losses Thursday, were down as well. The Standard & Poor's 500 index dropped 9.16, or 0.76 percent, to 1,191.57. The Nasdaq composite index lost 17.39, or 0.84 percent, to 2,053.27.

Investors overlooked decent economic news, choosing instead to focus on oil. Transportation and manufacturing companies -- considered the most oil-dependent -- were hardest hit, though the selling was spread throughout the market as crude oil futures threatened to top the psychologically significant $60-per-barrel barrier for the second day in a row.

"The crude situation is a big concern right now," said Brian Williamson, an equity trader at The Boston Company Asset Management. "People aren't really looking at the economic numbers."

Even the economic data, while mostly positive, raised some concerns. The Commerce Department reported a 5.5 percent rise in orders to U.S. factories for big-ticket manufactured goods last month, but much of that was due to a surge in demand for commercial aircraft. With transportation orders removed, durable goods orders fell 0.2 percent in May, the third decline in the past four months.

Also adding some volatility to the market, institutional investors were adjusting their portfolios to reflect the annual rebalancing of the Russell indexes.

The bond market reflected investors' uncertainty, making substantial gains as stocks dropped. The yield on the 10-year Treasury note fell to 3.92 percent, down from 3.96 percent late Thursday. The dollar fell against most major currencies and gold prices also lost ground.

Crude oil futures were up 42 cents at $59.84 per barrel on the New York Mercantile Exchange, coming one day after oil prices surged past the $60 per barrel level for a new intraday high.

With few earnings reports and a relative dearth of economic news, oil remained the market's focus for nearly the entire week. The drop in stock prices Thursday effectively ended, at least for the short-term, the market's recent rally. For the week, the Dow lost 3.06 percent, the S&P fell 2.09 percent, and the Nasdaq dropped 1.76 percent.

In other economic news, sales of new homes climbed to the second highest level in history, but median home prices fell sharply in May. The government reported that sales of new single-family homes rose by 2.1 percent last month to a seasonally adjusted annual rate of 1.3 million homes, but the median cost dropped 6.5 percent to $217,000.

However, the economic data simply wasn't positive enough -- or broad enough -- to make a dent in investors' pessimism over the future effects of higher crude prices.

"People need a good reason to buy stocks, but they always have reasons to sell," said John Waterman, chief investment officer at Rittenhouse Asset Management. "We're seeing mixed economic data, high oil prices, so where do you put your money? Investors chase momentum, and there's none here."

Citigroup Inc. was up 7 cents at $46.95 after the world's largest financial services firm announced a $3.7 billion deal to swap most of its asset-management business for the broker-dealer business of Legg Mason Inc., as well as Legg Mason stock and a loan to the Baltimore financial-services firm. Legg Mason gained 15.3 percent, or $13.01, to $98 on the news.

Guidant Corp. sank 6.9 percent, or $4.70, to $63.90, after the medical devices maker warned doctors to avoid implanting certain defibrillator models due to manufacturing defects. The company has also alerted the Food and Drug Administration, which may classify the action as a recall.

Unocal Corp. added 66 cents to $65.68 after the Chinese state-owned oil company CNOOC Ltd., which made an unsolicited $18.5 billion offer for the oil company on Thursday, said it was willing to discuss selling some Unocal assets and putting others under American management. The announcement came after four members of Congress called on the U.S. government to review the security implications of the proposed deal. Rival bidder Chevron Corp. lost 64 cents to $56.69.

The Russell 2000 index, which tracks smaller company stocks, was down 3.72, or 0.59 percent, at 630.40.

Declining issues outnumbered advancers by nearly 5 to 3 on the New York Stock Exchange, where final consolidated volume was 2.49 billion, compared with 2.02 billion traded on Thursday.

Overseas, Japan's Nikkei stock average slipped 0.34 percent. In Europe, France's CAC-40 fell 0.95 percent, Britain's FTSE 100 declined 0.69 percent and Germany's DAX index was down 1.32 percent.

The Dow Jones industrials ended the week down 325.23, or 3.06 percent, finishing at 10,297.84. The S&P 500 index lost 25.39, or 2.09 percent, to close at 1,191.57.

The Nasdaq fell 36.84, or 1.76 percent, during the week, closing Friday at 2,053.27.

The Russell 2000 index, which tracks smaller company stocks, closed the week 13.79, or 2.14 percent, lower at 630.40.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended the week at 11,843.88, down 232.22 points from last week. A year ago the index was 11,073.60

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com





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