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Metals Burn Stocks

Commodity prices put the heat on stocks Wednesday. Metals prices tumbled on signs of softer demand while oil rallied on fears of tighter supplies.

There's a bit of a contradiction, because slowing economies that use less copper, nickel and aluminum ought to use less oil, too. But with the sheer number of scenarios of diminished crude supplies worrying oil traders, stocks imagined a world where growth stalled and oil was still dear.

After trading as high as 10127.17 early on, the Dow Jones Industrial Average reversed to closed down 0.7% at 10,002.33. The S&P 500 lost 0.7% to 1113.64 vs. its intraday best of 1127.02. And the Nasdaq Composite, which traded as high as 1948.01 amid a positive reaction to earnings from tech bellwethers Intel (INTC - Get Report) and Yahoo! (YHOO - Get Report), lost 0.2% to 1920.53.

After hours Wednesday, Apple Computer (AAPL - Get Report) reported much stronger-than-expected results and was recently up 4.4%, but Sandisk (SNDK - Get Report) was tumbling 18% after reporting disappointing earnings.

Dust Off the Hats

The Dow just managed to stay above the "psychologically significant" 10,000 mark but don't heed that much. Looking at this year's trading, a drop below 10,000 doesn't seem to presage much at all.

The Dow last crossed below 10,000 on Sept. 27 and stocks then rallied a bit and declined. Before that was the breach on Aug. 5 that preceded a two-week selloff, followed by September's rally. A drop below 10,000 on July 23 was just a two-day affair. And two breaches in May helped form a bottom but the market hit a lower low in August.

Metal prices really took a dive, beginning in Europe overnight, as a report showed demand for copper fell in July, while stockpiles of aluminum jumped and the Chinese premier gave a speech about mineral resource conservation.

Copper futures dropped 11%, the biggest decline since 1990, to $1.288 a pound. A report by the International Copper Study Group in Portugal said China's copper usage fell 21% in July from a year earlier. On the London Metal Exchange, aluminum dropped 6% after inventories at the exchange's warehouses increased 2.5%, the biggest one-day jump in more than a year. News that the supply was delivered in Singapore fanned the flames of a China slowdown.

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CTX $26.29 0.00%
AAPL $124.75 0.00%
AA $13.46 0.00%
BHP $46.44 0.00%
INTC $32.47 0.00%

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