U.S. Stocks Fall As Oil Rise Pressures Consumer Shares
NEW YORK (MarketWatch) -- U.S. stocks erased early gains on Monday, as rising crude oil prices pressured consumer-related stocks and after news that Kuwait scrapped plans for a $17.4 billion joint venture with Dow Chemical.
Fund managers and other investors were also selling some of this year's most battered stocks to reduce tax-liability next year, while also starting to buy some of the best performers to embellish portfolios -- so called 'window-dressing".
"There might be a little pressure still out there, but we wouldn't hold out hope for window dressing this year," said Marc Pado, market strategist at Cantor Fitzgerald.
However, he said this week, which will be shortened by the New Year's holiday on Thursday, is likely to yield very little action.
The Dow Jones Industrial Average fell 83 points, or 1%, to 8,432, with 27 of its 30 components falling, led lower by financial shares such as Citigroup and J.P. Morgan Chase .
The S&P 500 index fell 0.4 points to 872, while the Nasdaq Composite fell 2.5 points to 1,527.
The energy sector was the only gainer on the S&P 500, rising nearly 1%, led by the likes of Transocean Ltd. , Southwestern Energy and Exxon Mobil .
Oil was the main focus Monday after a second day of strong gains pushed the February light crude contract back above $40 a barrel.
Rising tension in the Middle East pushed the contract higher as Israeli air strikes in the Gaza Strip continued and the country's Defense Minister Ehud Barak reportedly said it was fighting a "war to the death" with Hamas.
Light crude for February delivery rose 85 cents, or 2.3%, to $38.57 a barrel in electronic trading, having reached $42.20 earlier in the day.
U.S. stocks ended higher in light trading Friday, led by gains in energy shares, with retailers also in focus as post-Christmas sales began in earnest. The Dow Jones Industrial Average closed up 47 points, the S&P 500 gained 7.4 points and the Nasdaq Composite advanced 5.3 points.
Post holiday "retail sales data were poor, but perhaps not as bad as some of the worst-case projections," Cantor's Pado said. "The market seems to be handling the negative news in stride."
In other oil-related news, Kuwait said Sunday that it is terminating plans for its $17.4 billion joint venture with Dow Chemical Co. amid political opposition.
Forming the venture -- known as K-Dow -- would have given the chemicals giant access to lower-cost petroleum and was a key part of CEO Andrew Liveris' strategy for the group. But the deal was reportedly heavily criticized by Kuwaiti lawmakers.
Shares in Dow Chemical slumped more than 20%.
The move could also raise questions over Dow's planned acquisition of Rohm & Haas , which reportedly was to be partly funded by the money received from Kuwait. Rohm & Haas noted in a brief statement Monday that the completion of the K-Dow deal wasn't a requirement of its takeover. Rohm & Haas shares fell nearly 22%.
With little on the economic calendar, the dollar weakened against both the euro and the yen. The euro rose 1.8% at $1.4273, while the greenback fell 0.6% against the yen at 90.24 yen.
By Nick Godt