US stocks drop on volatile oil prices
US stocks dropped for a second straight session yesterday as Libya’s violence sent oil prices up briefly to $100 (£61.69) a barrel and tech shares sank, adding credence to calls for a market correction.
The Dow Jones industrial average fell 107.01 points, or 0.88 per cent, at 12,105.78. The Standard & Poor’s 500 Index lost 8.04 points, or 0.61 per cent, to 1,307.40. The Nasdaq Composite Index declined 33.43 points, or 1.21 per cent, to 2,722.99.
Oil futures jumped to their highest since October 2008 amid worries about supply disruptions in Libya, a top oil producer. Late in the day, oil eased off the day’s highs, helping stocks trim losses.
“We’ve had a solid run-up here in the equity markets for an extended period, really without a correction, so long-term, this will be a good thing for the market to have a little bit of a pullback,” said Wayne Schmidt, chief investment officer at Gradient Investments.
The Nasdaq led losses as recent top gainers also lost ground, including Netflix, down 4.7 per cent at $211.20, and Salesforce.com, down 2.5 per cent at $133.37.
The S&P 500 has climbed nearly 25 per cent since the start of September and many analysts have said a short-term correction is likely. However, the benchmark index recovered from hitting an intraday low of 1,299.55 during the session. Analysts eyed support at 1,296, the mid-January highs on the S&P 500, and also 1,286, the 50-day moving average.
“You saw a lot of shorts this morning, going into this market with anticipation of problems spreading in the Middle East, and now that people have made some money, you might see some short covering in the afternoon,” said Doreen Mogavero, chief executive of Mogavero, Lee & Co.
While higher oil prices often boost energy-sector shares, they usually drag on the overall stock market. Higher energy costs tend to reverberate through the economy, pushing up the costs of utilities, manufactured goods and transportation.
The S&P energy index gained two per cent, while the Dow Jones Transportation Average shed 2.1 per cent.
Volume was active with about 10.25bn shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the daily average of 7.99bn.
Declining stocks outnumbered advancing ones on the NYSE by 1,959 to 1,062, while on the Nasdaq, decliners beat advancers by 1,996 to 629.