U.S. Stock Indexes Poised For Weekly Declines As Oil Prices Soar
NEW YORK (MarketWatch) -- U.S. stocks on Friday skidded sharply lower, wiping out weekly gains, as oil prices soared to top $139 a barrel and the nation's jobless rate in May hit 5.5%, the highest since October 2004.
"The jobs report is going to dominate everyone's attention," said Phil Orlando, equity market strategist at Federated Investors. "The nonfarm payrolls data was fine. In fact, it was a little better than expected, but what is going to be the headline in every paper in America tomorrow is the unemployment rate spiked to 5.5%."
Economists had forecast a far smaller 0.1 percentage point gain in the unemployment rate, to 5.1%.
The Dow Jones Industrial Average slid 339.6 points, or 2.6%, to 12,264.85, with all of its 30 components in the red.
Heavy losses were posted by the likes of with American International Group Inc. and General Motors Corp. .
With an hour to go in the trading day, the blue chips were down 3% from where they stood at last Friday's close.
The S&P 500 fell 32.76 points, or 2.3%, to 1,371.29, readying the S&P for a loss of 2.1% from a week ago. Consumer discretionary and financials led sector declines, with the former off 3.9% and the latter down 3.7%.
Energy proved the only one of 10 S&P industry groups posting gains, up 0.4%.
The technology-dominated Nasdaq Composite shed 61.29 points, or 2.4%, to 2,488.65, positioning it for a weekly decline of 1.3%.
"If people over the course of the day start to focus on wage inflation, nonfarm numbers, et cetera, we might do better after a sloppy opening. Or, investors may decide to shift to the price [rise] of crude over the last two days, and sell on that," Orlando said.
Crude moves
Crude oil was sharply higher for a second straight day.
Crude futures reached a record of $139.01 in electronic trading on Globex, an all-time high for a front-month future contract, while July crude was last up $10.96, or 8.6%, at $138.75 a barrel on the New York Mercantile Exchange and climbed as high as $138.80 earlier on.
"Tough talk from Israel, where an official there said attacks on Iran's nuclear facilities looked 'unavoidable,' has ramped up geopolitical concerns. If all that is not enough, a U.S. investment bank has raised its oil price forecast to $150 a barrel by July 4th," said analysts at Action Economics.
On Thursday, crude futures bounced off a key support level of $122 a barrel, but the bounce was "a bounce with steroids," Orlando said.
Other commodities trade had gold futures climbing more than $23 an ounce to end the week with a gain of 0.8%, with August gold up $23.50 at $899 an ounce.
Friday's volume on the New York Stock Exchange hit 937 million, with decliners topping advancing issues 4 to 1. On the Nasdaq, 653 million shares switched hands, and declining stocks outran those advancing more than 4 to 1.
On Thursday, U.S. stocks snapped a three-session losing streak, rallying strongly after better-than-expected weekly jobless claims data and a strong May sales report from retailing giant Wal-Mart Stores Inc. .
On the heels of that report, Wal-Mart is holding its annual investors' meeting.
Active issues
Shares of National Semiconductor Corp. shares rose 5.8% in recent trade after it beat earnings and sales forecasts.
The Wall Street Journal reported American International Group is under inquiry as the Securities and Exchange Commission examines the blue-chip insurance giant's involvement in credit default swaps.
The Journal also reported National City Corp. is under heightened scrutiny from federal regulators. Other medium-sized banks are also likely being closely watched as regulators push lenders to raise more capital and improve risk management, the newspaper said.
Also in the banking sector, Societe Generale downgraded Swiss institutions UBS and Credit Suisse to sell from hold, sayingit expects the investment banking sector to see revenue fall back to 2005 levels.
Best Buy Co. Inc. fell 6.2% after its downgrade to hold from buy at Deutsche Bank, which cited increased competition from Wal-Mart.
In deal news, Dutch chip-equipment manufacturer ASM International said it received a preliminary approach from Applied Materials about potentially buying two business units for $400 million to $500 million.
By Kate Gibson