Wall Street retreated Monday on concerns that Israel's attack on Gaza might disrupt oil production and shipments from the Middle East, driving oil prices higher.
Investors remained cautious in a holiday-shortened week, unwilling
to make many big bets in the final three days of trading for 2008.
Israel's escalating attacks against Gaza's Hamas rulers made traders
more hesitant to buy.
The tensions pushed oil prices above $40 a barrel during the
session, though crude was up just 37 cents at $38.03 a barrel on the New York Mercantile Exchange at midday. Oil has fallen more than $100 from its peak of $147.27 a barrel on July 11 as a slowing economy curbed demand.
Todd Leone, managing director of equity trading at Cowen & Co.,
said volume is extremely light and that is contributing to the market's
swings. Low volume tends to skew price movements.
"What's going on in Israel didn't read well over the weekend," Leone
said. "Beyond that, it is an incredibly quiet session. It's really not
taking much to move the markets."
Investors also digested a potential blow to dealmaking on Wall
Street. On Sunday, Kuwait's government canceled its $17.4 billion K-Dow
Petrochemicals joint venture with Dow Chemical Co., saying it was "very
risky" because of the global financial crisis and low oil prices. The
joint venture was set to begin Thursday.
Rohm & Haas Co. maintains that its proposed $15.3 billion
takeover by Dow Chemical won't be affected by Dow's substantial loss of
income from the venture. But investors punished shares, driving them
down $10.76, or 17 percent, to $10.76. Dow Chemical shares lost $3.89,
or 21 percent, to $15.03.
In early afternoon trading, the Dow Jones industrial average fell 121.55, or 1.43 percent, to 8,394.00.
Broader indexes also declined. The Standard & Poor's 500 index
fell 14.21, or 1.63 percent, to 858.59; the Nasdaq composite index fell
34.20, or 2.23 percent, to 1,496.04.
Declining issues were ahead of advancers by nearly 2 to 1 on the New
York Stock Exchange, where volume came to 353.1 million shares.
Bond prices rose. The yield on the benchmark 10-year Treasury note,
which moves opposite its price, fell to 2.06 percent from 2.14 percent
late Friday. The yield on the three-month T-bill, considered one of the
safest investments, rose to 0.02 percent from 0.01 percent late Friday.
The dollar was lower against other major currencies, while gold prices edged higher.
Wall Street has largely written off the final three trading days of
2008, the worst year since Herbert Hoover was president. The Dow has
fallen 36.2 percent, the biggest drop since 1931 when the Great
Depression sent stocks reeling 40.6 percent. And the Standard &
Poor's 500 index is set to record the biggest drop since its creation
in 1957. The index of America's biggest companies is down 40.9 percent
for the year.
Dave Rovelli, managing director of trading at brokerage Canaccord
Adams, said investors will be waiting to make big moves until after the
Jan. 20 inauguration of President-elect Barack Obama. Wall Street is
eager for details on his proposed stimulus package for the economy.
"No one is going to do anything until the New Year," he said.
However, if companies release earnings warnings early in January, or
if the first wave of fourth-quarter reports are disappointing, the
market could see a return of heavy selling. Investors will be focusing
on any word from companies deemed critical to the economy, especially
from the beleaguered financial and retail sectors.
This week, investors will also be looking for insight into how
retailers fared after the weak Christmas selling season. Stores have
slashed prices even further to entice post-holiday shoppers but with
many consumers nervous about the economy they're reluctant to open
their wallets. That's a troubling prospect for investors, since
consumer spending accounts for more than two-thirds of U.S. economic
activity.
The Russell 2000 index of smaller companies fell 14.35, or 3.01 percent, to 462.42.
Overseas, Japan's Nikkei stock average rose 0.09 percent. In afternoon trading, Britain's FTSE 100 rose 2.44 percent, Germany's DAX index rose 1.63 percent, and France's CAC-40 rose 0.47 percent.
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