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Stocks drop advances as oil tops 60 end of 2005 Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aACxHEHy83MU&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aACxHEHy83MU&refer=home
U.S. Stocks Drop as Oil Tops $60; Dow Wipes Out 2005 Advance
Dec. 8 (Bloomberg) -- Surging energy prices sent U.S. stocks lower, wiping out the Dow Jones Industrial Average's advance for the year.
The market retreated as crude oil rose above $60 a barrel and natural gas reached a record in New York trading, reviving concern that higher fuel costs may curtail consumer spending.
``We've pretty much capped out our gains,'' said Art Hogan, chief market analyst at Jefferies & Co. in Boston. ``I don't think there's enough of a positive catalyst in the next three weeks to sustain'' a fourth-quarter rally, he said.
Intel Corp. and semiconductor shares led the decline before the chipmaker's mid-quarter update, which proved to be disappointing. General Motors Corp. led the Dow's slide as the automaker held talks with Kirk Kerkorian, its third-largest investor, about a board seat.
The Dow average slid 55.79, or 0.5 percent, to 10,755.12, giving it a drop of 0.3 percent this year. The Standard & Poor's 500 Index slipped 1.53, or 0.1 percent, to 1255.84. The Nasdaq Composite Index fell 5.55, or 0.3 percent, to 2246.46.
The Dow average's earlier gain of as much as 0.3 percent was spurred by a slide in bond yields. Oil's climb to its highs for the day in the afternoon sent the stock market lower.
Energy Prices
Crude oil for January delivery jumped 2.5 percent to $60.66 a barrel on forecasts for more cold weather in the U.S., which may increase consumption of heating fuel. Futures are up 45 percent in the past year. Natural gas for January delivery rallied 9.5 percent to close at a record $14.994 per million British thermal units.
The S&P 500 is down 1 percent from its fourth-quarter high on Nov. 25, which was also a level not seen since June 2001.
An index of semiconductor stocks lost 1.9 percent for the steepest drop among two-dozen industry groups in the S&P 500.
Intel Corp. lost 45 cents to $25.70 before its mid-quarter update after the close. Shares of the world's No. 1 maker of computer chips extended their decline after hours as the company lowered the high-end of its fourth-quarter revenue forecast. Intel expects sales of $10.4 billion to $10.6 billion. It had predicted revenue of $10.2 billion to $10.8 billion.
GM, the world's biggest automaker, slid $1.04, or 4.5 percent, to $22 for the steepest decline in the Dow average. The stock lost most of its gain from yesterday when the company said it's in talks with billionaire Kerkorian's Tracinda Corp. about a ``possible'' seat on the GM board.
McDonald's, Merck
McDonald's Corp., the world's largest restaurant chain, fell 44 cents to $34.82. The company said sales at locations open at least 13 months rose 3.8 percent in the first 11 months of 2005, slower than growth of 7.1 percent in the same period last year. In Europe, same-store sales increased 0.1 percent, the slowest expansion in six months. Prudential Equity Group LLC expected an increase of 2 percent.
Merck & Co. slid 61 cents to $29.68. A study on the company Vioxx painkiller published in 2000 understated the drug's risks by omitting three cases of heart attacks that were known to some of the authors, the New England Journal of Medicine said. Merck said it ``correctly communicated'' the Vioxx findings and the study ``fairly'' described results.
Texas Instruments Inc., the largest maker of mobile-phone chips, slid with the semiconductor group even after the company improved its forecast. Fourth-quarter net income will be 38 cents to 40 cents a share, compared with an October forecast of 36 cents to 40 cents, the company said. Sales will be $3.56 billion to $3.71 billion, narrowed from the $3.42 billion to $3.72 billion the company predicted earlier. The shares fell 93 cents to $32.63.
Micron Technology Inc. lost 53 cents, or 3.9 percent, to $13.13 for the third-biggest drop in the S&P 500. The largest U.S. maker of computer-memory chips was downgraded to ``hold'' from ``buy'' by analyst John Lau at Jefferies & Co.
Bond Yields
Five stocks rose for every four that fell on the New York Stock Exchange. Almost 1.7 billion shares changed hands on the Big Board, in line with the three-month daily average.
Stocks got an earlier boost as a drop in the 10-year Treasury note's yield signaled investors are growing optimistic that the Federal Reserve is getting close to the end of its interest-rate increases.
The yield on the benchmark 10-year note, which moves opposite its price, fell 5 basis points, or 0.05 percentage point, to 4.46 percent in New York.
The central bank on Dec. 13 is expected to boost its target rate a quarter point to 4.25 percent, according to all 72 economists surveyed by Bloomberg News.
Investors flocked to shares of utilities, whose dividends gain appeal as bond yields fall. The group had the second- biggest gain among the S&P 500's 10 industry groups. TXU Corp., the largest power company in Texas, led the advance, climbing $1.98 to $105.28. The utilities group has a dividend yield of 3.4 percent, compared with 1.8 percent for the S&P 500.
Energy Shares
Energy stocks staged the largest rally in the S&P 500. The gauge added 1.5 percent, bringing its gain for the year to 35 percent. Oil and gas shares make up 9.7 percent of the S&P 500 today, up from 7.2 percent at the start of the year.
Exxon Mobil Corp., the world's largest publicly traded oil company, climbed 40 cents to $59.42. Valero Energy Corp., the No. 1 U.S. refiner, rose $2.58 to $106.56. EOG Resources Inc., which produces natural gas and oil in the U.S., Canada and Trinidad and Tobago, climbed $2.30 to $78.65.
The market found some support near the end of trading after the U.S. House passed a $56.6 billion budget measure extending a 15 percent tax rate on dividends and most capital gains for two years until 2010. The vote opens the way for negotiations with the Senate on a final tax-reduction package.
S&P 500 shares, called Spiders, slipped 8 cents to $126. Nasdaq-100 tracking shares, known by their QQQQ symbol, fell 30 cents to $41.56.
S&P 500 futures expiring in December lost 1.60, or 0.1 percent, to 1263.20 on the Chicago Mercantile Exchange. Nasdaq- 100 Index futures were down 5.50, or 0.3 percent, at 1698.50.
The Russell 2000 Index, a benchmark for companies with a median market value of $569 million, rose 0.3 percent to 685.22. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, slipped 1.70 to 12,579.40. Based on the changes in the Wilshire, the value of stocks decreased by $1.7 billion.
EOG Resources Inc. (EOG US)
Exxon Mobil Corp. (XOM US)
General Motors Corp. (GM US)
Intel Corp. (INTC US)
McDonald's Corp. (MCD US)
Micron Technology Inc. (MU US)
Merck & Co. (MRK US)
Texas Instruments Inc. (TXN US)
TXU Corp. (TXU US)
Valero Energy Corp. (VLO US)
Last Updated: December 8, 2005 16:59 EST
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