WALL STREET
Stocks drop after new record for oil
By Tim Paradis
- ASSOCIATED PRESS
Updated: 07/03/08 7:01 AM
NEW YORK — Wall Street resumed its sell-off Wednesday after oil hit a new record and a bearish analyst report renewed concerns that General Motors Corp. could run out of cash.
The stock market’s pullback, which accelerated in the final hours of the week’s last full trading session, left the Dow Jones industrial average officially in bear market territory, with the blue chips having fallen more than 20 percent from their October highs.
Oil surged to new records above $144 a barrel as the government reported a bigger-than- expected drop in U. S. supplies and as investors worried about tensions in the Middle East.
Fears that GM could go so far as to declare bankruptcy only added to investors’ unease. The stock closed below the $10 mark for the first time since September 1954 when Dwight Eisenhower was president. Investors shrugged off better-than- expected sales figures from June and fretted about the company’s cash needs.
The Dow fell 166.75, or 1.46 percent, to 11,215.51, the lowest close since August 2006. It now stands 20.82 percent below its Oct. 9, 2007 record of 14,164.53. The last bear market ended in October 2002.
Broader stock indicators also posted big losses after showing gains for much of the morning. The Standard & Poor’s 500 index fell 23.39, or 1.82 percent, to 1,261.52, while the technology-laden Nasdaq composite index fell 53.51, or 2.32 percent, to 2,251.46.
The S&P is just shy of the 20 percent pullback that signals a bear market. While the Nasdaq is also in bear territory, it hit that mark in March, moved higher and has now returned to a bear level.
Bond prices rose as investors exited stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.96 percent from 4.01 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.
Crude oil hit a record $144.32 a barrel in after-hours trading after reaching a record settlement of $143.57, an advance of $2.60 on the New York Mercantile Exchange. The Energy Department reported Wednesday that U. S. crude oil supplies fell more than expected last week.
Businesses are also struggling with elevated energy costs, and demand is weakening for autos, heavy machinery and steel. The Commerce Department said Wednesday that factory orders rose by 0.6 percent in May. The result was in line with a consensus of Wall Street economists surveyed by Thomson Financial, but was much smaller than the gain of 1.3 percent for April.
Traders were cautious ahead of the three-day weekend. The stock market closes three hours early today, at 1 p. m. EDT, before the Fourth of July holiday
on Friday.
The Russell 2000 index of smaller companies fell 19.25, or 2.78 percent, to 672.34.
Declining issues outpaced advancers by nearly 3 to 1 on the New York Stock Exchange, where consolidated volume came to 5.15 billion shares, compared with 5.75 billion shares traded Tuesday.
Overseas, Japan’s Nikkei stock average fell 1.31 percent. Britain’s FTSE 100 fell 0.98 percent, Germany’s DAX index slipped 0.17 percent, and France’s CAC-40 fell 1.03 percent.
