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Stocks drop as oil hits new highs Original Source Link: (May no longer be active)
http://today.reuters.com/news/newsarticle.aspx?type=businessNews&storyid=2006-04-11T170653Z_01_N07233917_RTRUKOC_0_US-MARKETS-STOCKS.xml&rpc=23http://today.reuters.com/news/newsarticle.aspx?type=businessNews&storyid=2006-04-11T170653Z_01_N07233917_RTRUKOC_0_US-MARKETS-STOCKS.xml&rpc=23
Stocks drop on oil, Iran and earnings jitters
Tue Apr 11, 2006 1:07 PM ET
By Ellis Mnyandu
NEW YORK (Reuters) - U.S. stocks fell on Tuesday as investors worried that higher oil prices would hurt consumer spending and stifle corporate earnings growth.
The Nasdaq Composite Index bore the brunt of the sell-off, pressured by declines in semiconductor shares and Internet stocks such as Google Inc. An index of semiconductor stocks <.SOXX> was down 1.4 percent.
U.S. crude for May delivery was up 6 cents at $68.80 a barrel, after hitting a NYMEX session high at $69.25 as tensions escalated over Iran's nuclear work. Rising global demand for oil also supported crude oil futures prices, which rose more than $1 a barrel on Monday.
On Tuesday, some analysts said oil prices could climb as high as $100 a barrel.
"The market is under pressure due to oil prices, Iran and concern about prospects for more interest-rate hikes from the Fed," said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray in Minneapolis.
The Dow Jones industrial average <.DJI> was down 51.06 points, or 0.46 percent, at 11,090.27. The Standard & Poor's 500 Index <.SPX> was down 7.71 points, or 0.59 percent, at 1,288.89. The Nasdaq Composite Index <.IXIC> was down 20.74 points, or 0.89 percent, at 2,312.53.
Among the Dow's major decliners, shares of food and tobacco company Altria Group fell 1.1 percent to $69.28 on the New York Stock Exchange and weighed the heaviest on the blue-chip average.
The stock of American International Group Inc. , the world's largest insurer by market capitalization, fell 1 percent to $63.56, reflecting concerns about rising rates.
Former Iranian President Akbar Hashemi Rafsanjani said on Tuesday that Iran is producing enriched uranium, which the United States and other nations fear will be used to make nuclear weapons.
Investors see the federal funds rate going up to at least 5 percent from the current 4.75 percent, but there is active debate over the likelihood of another rate increase beyond that. Higher interest rates would hurt profits as the economy slows.
Bausch & Lomb Inc.'s stock sank 17 percent to $47.65 -- its biggest drop in more than 5 1/2 years -- and ranked among the NYSE's biggest net losers, a day after the company said it would stop shipping a type of contact lens solution. Some of the solution's users were diagnosed with serious eye infections.
Among Nasdaq stocks, Google's shares fell 1.4 percent to $410.54. Earlier Tuesday, Piper Jaffray raised its revenue growth forecast for the Web search company's first quarter and said it would buy Google's stock before its earnings release on April 20, "especially on headline-associated weakness."
"There's a lot of skepticism about earnings," said John O'Brien, head of sales trading at KeyBanc Capital.
The market's jitters overshadowed a stronger-than-expected quarterly profit reported after Monday's closing bell by Alcoa Inc. , the world's largest aluminum producer.
Alcoa, up 6 percent at $34.79 on the NYSE, was the Dow's biggest gainer and helped limit its decline.
In spite of Alcoa's robust earnings, some investors feared that other companies may still warn about results falling short of profit targets.
"Alcoa is just a tip of the iceberg. I still expect that there'll be a pick-up in negative pre-announcements," O'Brien said.
Higher oil prices helped lift energy companies' shares. Exxon Mobil Corp. shares gained 0.6 percent to $62.31, while ConocoPhillips shares added 1.6 percent to $67.76. Their gains helped limit the S&P 500's decline.
Positive comments from Citigroup lifted the shares of heavy equipment maker Caterpillar Inc. -- up 0.5 percent at $75.80. Along with Alcoa and Exxon, Caterpillar helped curb the Dow's losses.
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