Jan 12, 2009 1:00 pm US/Pacific
Stocks Drop As Falling Oil Hurts Energy Companies
NEW YORK (AP) ―
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Traders work on the floor of the New York Stock Exchange moments before the closing bell December 9, 2008 in New York City.
Spencer Platt/Getty Images
Wall Street extended last week's slide Monday as investors worried that the quarterly results companies begin releasing this week will signal the economy is in worse shape than feared.
Oil prices helped fuel the pessimism, tumbling 8 percent to a new low for the year as investors bet economic weakness would curb demand. Wall Street normally welcomes falling oil as a boost for consumers who pay less to put gas in their car, but steep drops can touch off deeper fears about the overall economy.
Wall Street is expecting fourth-quarter and full-year earnings will be particularly bleak, especially after several companies warned last week that they are being hit hard by the recession. Aluminum producer Alcoa Inc., which last week announced it would slash production, fell again Monday after an analyst lowered his rating on the stock. Alcoa said after the market closed that it lost $1.19 billion during its fourth quarter as demand for aluminum plunged.
Financial stocks also declined as investors looked to Citigroup Inc. and Morgan Stanley, which could announce a deal as soon as Wednesday to combine their brokerage operations. The potential tie-up underscores the troubles some banks are still having with tattered balance sheets, and a prominent analyst said Citigroup might still need to raise cash.
"I think that the biggest concern right now is the economy and whether this thing is going to get worse or it's going to get better," said Bernie McGinn, chief executive of McGinn Investment Management.
The intensity of the fear that permeated the market and provoked the heavy selling of September, October and November has lessened, McGinn said, but investors are still hesitant to flood back into the market. Monday's decline came on light volume, indicating an absence of buyers, not a rush of sellers. Traders said many investors were sitting on the sidelines until they get a better read on companies' quarterly numbers and, more important, their forecasts for the year.
"The level of anxiety and the level of fear has moderated some, but it sure as heck hasn't turned into optimism," McGinn said.
According to preliminary calculations, the Dow Jones industrial average fell 125.21, or 1.46 percent, to 8,473.97.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 20.09, or 2.26 percent, to 870.26, and the Nasdaq composite index fell 32.80, or 2.09 percent, to 1,538.79.
The Russell 2000 index of smaller companies fell 12.50, or 2.60 percent, to 468.80.
Declining issues outpaced advancers by nearly 4 to 1 on the New York Stock Exchange, where volume came to 1.31 billion shares compared with 1.16 billion traded Friday.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
Timeline: U.S. Credit Crunch & Financial Failures
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