NEW YORK - The ongoing slump in oil prices weighed on stocks again on Tuesday, pushing energy companies to another day of big losses. Disappointing earnings outlooks from a range of companies, including Priceline and Michael Kors (KORS) also weighed on the market.
Oil has fallen sharply in recent weeks as global supplies rise while demand for fuel trails expectations. Sparking the latest decline was news that Saudi Arabia is cutting the price of oil it supplies to the U.S. in an attempt to maintain its market share as U.S. production booms.
The drop in oil prices has hit energy stocks hard, driving them into negative territory for the year. It has also helped pull the stock market down from the record levels it reached last week.
"It's a case of sell first, ask questions later, for anything oil-related," said Quincy Krosby, a market strategist at Prudential Financial.
The Standard & Poor's 500 index fell 5.71 points, or 0.3 percent, to close at 2,012.10. The Nasdaq composite dropped 15.27 points, or 0.3 percent, ending at 4,623.64. The Dow Jones industrial average bucked the trend, edging up 17.60 points, or 0.1 percent, to finish at 17,383.84.
While energy stocks are suffering, many analysts and investors predict that the U.S. economy will benefit in the long run from lower energy prices. Cheaper gasoline will put more money in consumers' pockets, giving them additional spending power.
Airline stocks were among the winners Tuesday as energy prices fell. Fuel is their single largest operating cost, and lower prices should mean higher profits if demand for air travel stays strong. Delta Airlines (DAL) surged $1.71, or 4.2 percent, to $42.32. United Continental (UAL), Jet Blue (JBLU) and Southwest Airlines (LUV) also logged big gains.
Investors were also keeping an eye on third-quarter earnings reports.
Michael Kors fell the most in the S&P 500 index after the maker of luxury handbags, shoes and other accessories gave an outlook for the fourth quarter that disappointed investors. The stock fell $6.57, or 8.4 percent, to $71.42.
Priceline (PCLN) also slumped. The online travel booking company dropped $100.82, or 8.4 percent, to $1,097.70 after it hinted that the weak economic backdrop in Europe would hurt earnings in the current quarter. Priceline reported that its earnings rose 28 percent in the third quarter, but its outlook for the current quarter fell short of analysts' projections.
Investors will also be following the outcome of the midterm elections. Polling across the board gives Republicans well over a 50 percent chance of turning out at least six incumbent Senate Democrats or capturing seats left vacant by Democrat retirements, an outcome that would put the opposition in charge of both houses of Congress in the final two years of President Barack Obama's second White House term.
Some strategists say even if Republicans win both houses, it will likely have little impact on the direction of the stock market in coming months.
"The reality is that you're still going to have a Democratic president, and very little is going to get done in the last two years of his term," said David Lafferty, chief market strategist at Natixis Global Asset Management. "When elections really begin to matter is probably going to be in the next cycle."
The news from overseas may also have discouraged buyers.
The European Union cut its already low economic growth forecasts further on Tuesday, indicating the recovery will remain sluggish amid problems for the biggest economies, particularly France and Germany. The official forecast for growth this year in the 18-country eurozone was cut to 0.8 percent from a prediction of 1.2 percent made in the spring. The EU also cut its forecast for next year.
Germany's DAX dropped 0.9 percent to 9,169, while France's CAC-40 fell 1.5 percent to 4,129. The FTSE 100 of leading British shares fell 0.5 percent to 6,453.
The dollar's surge against the yen abated Tuesday, a day after the U.S. currency rose to its highest point in almost seven years. The dollar was flat at 113.51 yen. It fell against the euro, trading at $1.2550. U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 2.32 percent.
In metals trading, silver for December delivery slumped 25 cents, or 1.5 percent, to 15.95 an ounce. Gold for the same month dropped $2.10, or 0.2 percent, to $1,167.70 an ounce. Gold is now trading at a four-year low.
Copper for December slipped 4.7 cents, or 1.5 percent, to $3.02 per pound.