U.S. Stocks Fall As Oil Trades Above $66/barrel
NEW YORK (MarketWatch) -- U.S. stocks turned lower on Thursday, as a sharp rise in crude oil prices, which topped $66 a barrel, weighed on the market, offsetting an earlier boost from a report showing fourth-quarter growth was unexpectedly revised higher.
"Stocks opened higher but were unable to hold early gains amid ongoing concerns about geopolitical instability accompanied by rising energy prices," said Frederif Ruffy, an analyst at Optionetics.
Crude oil prices gained over 3% to above $66 a barrel amid continuing tensions between the UK and Iran, one of the world's largest oil producers.
The Dow Jones Industrial Average was recently down 5 points at 12,295, after earlier rising by over 80 points to a morning high of 12,381.
Stocks earlier traded firmly higher following the unexpected upward revision to the fourth-quarter gross domestic product (GDP).
There was "a little bit of a boost from the GDP and a little bit of a need for stability," said Jay Susskind, director of trading at Ryan, Beck & Co.
Stocks have fallen for the past three sessions after rallying all of last week.
Money-managers were eager to fill their portfolios before the end of the month, which marks the end of the first quarter. "Today give an opportunity for end-of-quarter window-dressing, because tomorrow is loaded up with key economic data," Suskind said.
Among blue chips, Citigroup rose 1% after saying it planned to roughly double its China branch network in 2007. . And Boeing Co. gained 0.3% after Colombia's largest airline, Avianca SA, said it would buy 10 of Boeing's 787 Dreamliner aircraft. .
Intel was flat after saying it would make design changes to boost microchip performance, including adopting techniques from rival Advanced Micro Devices . AMD fell 2%.
The S&P 500 index up 1.5 points at 1,418, while the Nasdaq Composite fell back 10 points to 2,406.
RF Micro Devices weighed on tech shares, falling 11% on heavy volume after the mobile phone parts supplier expects a sequential fall in first-quarter revenue, earnings and margins due to slower demand from an unnamed top-tier customer. Motorola recently issued a profit warning over handset sales.
Fourth-quarter GDP revised up
Stock futures had extended their gains after the Commerce Department said the economy grew at a 2.5% annual pace in the final three months of 2006, slightly faster than the previous estimate of 2.2%. Economists surveyed by MarketWatch were expecting the 2.2% estimate to be unrevised.
Even if backward looking, the report proved soothing for a market which has been rocked by concerns about waning economic growth amid a stumbling housing market and a meltdown in the subprime mortgage market.
In addition, seasonally-adjusted initial claims for unemployment fell by 10,000 to 308,000 in the latest week.
Stocks rallied last week on hopes that the Federal Reserve is leaning closer to cutting interest rates should the economy weaken too much. But Fed Chairman Ben Bernanke on Wednesday said the central bank remained concerned about inflation, putting a damper on those hopes.
"Gentle Ben is no more," said Marc Pado, market strategist at Cantor Fitzgerald, in a note. "Fighting inflation is job #1 at the Fed.," Pado said. "Housing is the biggest threat to the economy. And the Fed's hands are tied."
Still, with fourth-quarter economic growth revised slightly higher Thursday, "the market understands that things aren't as good as was thought last week, but not as bad as was thought yesterday," said Ryan, Beck's Suskind.
In the broad market for equities, trading volumes showed 891 million exchanging hands on the New York Stock Exchange and 1.1 billion on the Nasdaq stock market. Advancing issues outpaced gainers by 17 to 14 on the NYSE, while decliners outpaced gainers by 15 to 12 on the Nasdaq.
By sector, semiconductors , airlines and telecmmunications fell the most, while oil , oil services and pharmaceuticals led the gains.
Amid telecom shares, AT&T Inc. , Verizon Communications Inc. and Qwest Communications International Inc. were in focus after the federal government on Thursday selected the companies to compete for government contracts worth up to $48 billion over 10 years.
In a surprise move, Sprint Nextel Corp. was shut out of the first part of a two-part federal contract that could reach $48 billion over 10 years. The communications contract, known as Networx Universal, is the largest ever put out for bid by the U.S. government.
Other markets
Investors also wearily contemplated the return of rising energy prices as a wild card for consumers and the economy.
Crude-oil futures continued to climb, with the May contract rising $2.10, or 3.3%, to $66.18 a barrel on the New York Mercantile Exchange, backing slightly off an intraday high of $66.42.
Britain has asked the United Nation's Security Council Thursday to support a statement that would "deplore" Iran's actions and demand the immediate release of the British troops Iran have held captive since last week, according to a report from the Associated Press.
Meanwhile, Iran has suspended the release of the female British trooper it had previously said would be released Wednesday or early Thursday, the AP report said.
April gold futures fell $5.40 to $661.40 an ounce, as the dollar strengthened following the GDP revision. But gold bounced from an earlier low of $654.60.
The dollar was up sharply against the Japanese yen, even as if fell back against the euro.
Bonds fell after the GDP report. The benchmark 10-year Treasury bond was down 4/32 at 99 29/32, yielding 4.638%.
Merger news
Of companies in focus, Bell Canada owner BCE jumped 6.4%. The company may receive Canada's largest-ever takeover bid from a group led by Kohlberg Kravis Roberts, according to report in the Globe and Mail newspaper. The bid could be worth over $25 billion.
In other merger news, U.S. Steel rose 2.4% after saying it was buying Lone Star Technologies for $2.1 billion, or $67.50 a share. The per-share bid represents a 39% premium to Wednesday's closing price. Lone Star jumped 35%.
Chip maker Altera fell 0.1% after a new share buyback plan was announced alongside a 4 cents a share dividend.
Broker A.G. Edwards rose 2.4% after reporting fourth-quarter earnings that topped expectations.
By Nick Godt