Dow Industrials Down More Than 200 Points As Oil Spikes

NEW YORK (MarketWatch) -- U.S. stocks slumped Wednesday, extending the prior session's losses into 2008, as worries about economic growth mounted amid rising energy prices and signs of continued weakness in the manufacturing sector.

"As we start off the new year, the first piece of economic data that catches our attention is a disaster, as it shows a slowdown in economic activity; this is no way to start a party," said Art Hogan, chief market strategist at Jefferies & Co.

The Dow Jones Industrial Average declined 212.6 points to 13,052.3.

Of the blue-chip index's 30 components, all but one fell, with technology stocks the hardest hit. Intel Corp. was down 5.2% and IBM dropped 3.1%.

The broader indexes also declined. The S&P 500 shed 20.92 points to 1,447.44 and the Nasdaq Composite shed 50.29 points to 2,601.99.

The major stock indexes posted modest gains at the start, but quickly reversed course in the wake of data from the Institute of Supply Management, which reported its manufacturing index for December fell to 47.7, its weakest reading in more than four years. .

"The ISM was a poor number, showing more weakness in terms of manufacturing last month," said Peter Cardillo, chief market economist at Avalon Partners.

Also troubling was the prices-paid component, which climbed to 68 from 67.5. "We expected a decrease. It doesn't bode well for both the economy and the stock market," said Hogan.

Also tempering investor optimism was an early spike in crude oil that had futures rising above $98 a barrel, fueling concern about energy prices. Crude futures more recently were up $2.69 at $98.67. .

Gold futures also climbed, with the contract for February delivery ahead $22.5 to $860.5. .

The rise in commodities, along with the dollar extending its losses, "is certainly putting some jitters into the market. High inflation could lead to stagflation in the first quarter," said Cardillo.

Volume on the New York Stock Exchange hit 599 million, with declining stocks outpacing those advancing by almost 2 to 1. On the Nasdaq, nearly 933 million stocks exchanged hands, and declining issues outran advancers more than 2 to 1.

On Monday, stocks fell amid worries about economic growth, with the Dow industrials losing 101 points, the Nasdaq Composite shedding 22 points and the S&P 500 losing 10 points.

Other developments included a Commerce Department report, which had spending on U.S. construction projects hitting a two-month high in November, rising 0.1% as opposed to the 0.5% drop predicted in a survey of economists.

The afternoon will bring minutes from the Fed's Dec. 11 meeting, at which the central bank lowered interest rates by a quarter-point to 4.25%.

Overseas, European stocks slipped. .

Shares of Amazon.com Inc. climbed 2.4% after Citigroup raised its recommendation on the Web retailer from hold to buy.

The credit crunch continued to take its toll, with PHH Corp. , a provider of residential-mortgage and vehicle-fleet-management services, saying it had called off its plan to be acquired by General Electric Co.'s GE Capital financing unit. .

In the tech sector, Advanced Micro Devices was downgraded to sell at Banc of America Securities on worries about its position in servers as well as growing costs.

And Qualcomm said a judge ruled that it violated certain Broadcom patents and ordered it to stop making and selling certain cell-phone chips.

By Kate Gibson