Wall Street Remains Under Water As Crude Closes At Record High

NEW YORK (MarketWatch) -- U.S. stocks thudded lower Monday, with record oil prices catching negative attention from investors also contending with a warning from Citigroup Inc. that the credit crunch could harm fourth-quarter results of the nation's largest bank.

Parts of the fixed-income market "have shrunk dramatically and we are not optimistic they will regain a foothold in the market," Citigroup CFO Gary Crittenden said during a conference in which he warned the ongoing turmoil in the credit markets could hurt fourth-quarter results.

The warning came after Citigroup, the nation's largest bank, said net income in the third-quarter slipped to $2.38 billion from $5.51 billion for the year-ago period. .

The Dow Jones Industrial Average fell 154.3 points to 13,938.8, or 1.1%, with 25 of its 30 components trading in the red.

Giving up early gains, General Motors Corp. fell 4.5%, with the auto giant and Dow component pulling back from a three-year high after executives detailed a labor deal reached with the United Auto Workers union last month.

Of the Dow's advancing stocks, oil giant Exxon Mobil Corp. and Intel Corp. rose the most, with Exxon up 1.4% and Intel gaining 1.2%.

The S&P 500 fell 17.25 points to 1,544.55, while the Nasdaq Composite shed 32.76 points to 2,772.92.

Volume on the New York Stock Exchange came to 888 million, with declining stocks ahead of advancers 3 to 1. On the Nasdaq, nearly 1.5 billion shares were exchanged, and declining issues topped advancing stocks more than 2 to 1.

Crude rise

On the New York Mercantile Exchange, crude-oil futures advanced into uncharted territory above $85 a barrel amid ongoing concern about risks to production and declines in U.S. crude supply. Crude for November delivery closed at a record $86.13 a barrel, up $2.44, after rising up to $86.22 earlier on.

"When it (the price of oil) comes up because of demand, when the economy is picking up pace, the market is willing to tolerate it; if it's a supply issue pushing up price, that's a negative," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

Supply concerns, coupled with a cold winter, could send crude past the $90 a barrel mark, said Phil Flynn, senior analyst at Alaron Trading. .

In other action on the NYME, gold futures climbed more than $8 an ounce, sending the December contract to the highest level a front-month futures contract has seen since 1980.

Gold for December delivery was up $9.40, or 1.3%, at $763.20. .

Biogen Idec Inc. shares were up 18% after the biotech giant said it was considering selling itself to activist investor Carl Icahn, among others. Other drug stocks gained as well. .

And, in an announcement confirmed by participants Monday morning, Citigroup, J.P. Morgan Chase & Co. , and Bank of America Corp. are among the financial institutions that have agreed to create a "superfund" of up to $100 billion to clean up the credit markets, The Wall Street Journal first reported in its online edition.

Offering support for the market early on, the Federal Bank of New York released the New York Empire State Index, a regional economic measure, which climbed to 28.8 in October from 14.7 the month before, more than expected. .

In a slew of earnings reports early on, Mattel Inc. reported a 1% decline in third-quarter profit, with revenue falling below analysts' estimates. .

Electronic testing technology maker Danaher Corp. said it would pay $2.8 billion, or $38 a share, for Tektronix Inc. in a bid to expand its business.

Diversified manufacturer Eaton Corp. said third-quarter net income climbed 4%, but trimmed its profit outlook for the year in the face of "economic uncertainties." .

Shares of BEA Systems Inc. were off 2.9% after downgrades by three brokers, all of whom believe the business software maker is unlikely to draw a better offer than the $17 a sare, or $6.7 billion bid, from Oracle Corp.

The dollar began the week leading up to the Group of Seven meeting on a mixed note, slipping against the euro Monday but ticking higher against the yen. The dollar index fell 0.17% to 78.095. .

Treasurys edged slightly up, with the benchmark 10-year note gaining 4/32 at 100 20/32, its yield at 4.671%.

Overseas

European shares lost ground on Monday, with Dutch consumer-electronics giant Philips a notable decliner, while gains from the oil sector cushioned losses. .

In Asia, markets overcame intraday volatility to end mostly ahead, with shares in Shanghai and Hong Kong closing at records while Mumbai stocks were on the way to a record finish in afternoon trading. .

By Kate Gibson