U.S. stocks lose ground as oil soars and dollar slumps
NEW YORK: Oil surged to a fresh high above $119 a barrel and the dollar slumped to a new low against the euro on Tuesday, renewing U.S. inflation worries and underlining the weak state of the worlds biggest economy.
The surging oil prices darkened the mood on Wall Street, fueling concerns about how higher energy costs will affect consumer spending and corporate profits.
U.S. and European equity markets tumbled as several big American companies lowered their profit outlooks because of slowing economic growth.
McDonalds reported its first monthly decline in five years in sales at established restaurants.
The markets also felt the effect of a housing report from National Association of Realtors that underlined that the American housing market continues to struggle.
Existing home sales fell 2 percent to a 4.93 million-unit annual rate, the group said. The inventory of homes for sale swelled by 40,000 to 4.06 million homes, or a 9.9 months supply at the current sales pace from 9.6 months in February. Meanwhile, the median national home price declined 7.7 percent from a year ago to $200,700.
The Dow Jones industrial average closed 104.71 points lower at 12,720.31. The Standard Poors 500 index was down 12.22 points at 1,375.95. The Nasdaq composite index fell 31.10 points, or 1.3 percent, to 2,376.94.
U.S. crude oil hit an all-time peak of $119.90, bolstered by a jump in demand last month from China, the second-largest energy consumer, and supply worries from key producers Russia and Nigeria.
Light sweet crude for May delivery was up $1.69, or 1.4 percent, at $119.17 per barrel, at the close of trading.
Gold rose $7.90 to $925.50 an ounce.
The euro rose above $1.60 for the first time since its 1999 inception as expectations rise that the European Central Banks next move may be an increase in benchmark interest rates to curb inflation.
In late trading, the euro rose to $1.5994 from $1.5890 at 2 p.m. Monday. The pound rose to $1.9963 from $1.9790. The dollar fell to 102.900 from 103.270 and to 1.0028 Swiss francs from 1.0103 francs.
Corporate news also hurt equities.
The microchip maker, Texas Instruments, said its second-quarter earnings would be weaker than expected because of an uncertain economic situation as it cited customer caution and weak demand for high-end cellphones. The companys shares fell 6 percent.
The health insurer UnitedHealth Group posted lower-than-expected quarterly profit and lowered its full-year earnings forecast. Its shares fell almost 11 percent.
“People are looking at earnings outlooks,” said Giri Cherukuri, head trader at Oakbrook Investments in Lisle, Illinois. “Theyre worried about the economy. I think you need to see outlooks pick up, and that will help the market come back.”
European shares fell for a second consecutive day, led lower by banks after Royal Bank of Scotland, Britains second-largest bank, unveiled a record rights issue to cover increased write-downs on the value of assets.
The pan-European FTSE Eurofirst 300 index closed down 0.6 percent at 1,304.56 points.
Royal Banks 12 billion, or $23.7 billion, rights issue will be the biggest ever, and the bank also said it would sell assets to generate 4 billion in core capital this year to repair one of the sectors most stretched balance sheets.
“This indicates that the crisis is not over yet and that we may see further surprises,” said Carsten Klude, chief economist at M.M. Warburg in Hamburg, Germany. “The risk that profit forecasts are too high prevails. Especially forecasts for the second half of the year are still too optimistic,” he said.
RBS shares fell 3.9 percent
In Asia, Japans Nikkei stock average declined 1.1 percent, weighed by autos and falling financial stocks on worries about the U.S. banking sector.
World stocks on a MSCI measure were down 0.33 percent at 382.69.
The benchmark 10-year U.S. Treasury note rose 8/32 to 98 8/32, giving it a yield of 3.712 percent.
