U.S. Stocks Erase Gains to Close With Losses
09/02/08 - 04:34 PM EDT
Mike Taylor
Updated from 3:12 p.m. EDT
After a sharply higher open, stocks in New York petered out in afternoon trading to close with losses Tuesday, even as crude-oil prices posted a substantially decline. The Dow Jones Industrial Average, up as much as 230 points earlier, ended down 26.63 points, or 0.2%, at 11,516.92, and the S&P 500 closed down 5.26 points, or 0.4%, to 1277.57. The Nasdaq gave back 18.28 points, or 0.8%, to finish at 2349.24. Even as stocks in the financial and consumer-goods sectors advanced while oil prices fell, minerals and oil-related companies got hit, causing the major indices to jerk closer to the baseline. Tony Dwyer, equity market strategist at FTN Midwest Securities, said that the release of minutes to the Federal Reserve's Aug. 5 Federal Open Market Committee meeting suggested that three of the Fed districts requested an increase in the target interest rate. "I guess the market didn't like that so much," he said. Dwyer also pointed out that volume was low, and that energy stocks have dragged down the indices. "It's kind of hard to maintain strong momentum when a sector that makes up 13% of the market cap is down 5%." He added that intraday volatility from mid-August through today has been enormous. The price of crude oil plummeted $5.75 to settle at $109.71, after Gustav hit the Louisiana coast but largely spared New Orleans and energy-production facilities in the area. Gold dropped $24.70 to $810.50. "I think you're going to see a continuation of the selloff [in oil], which obviously is beneficial to equities in the short term," said Chris Johnson, CEO and chief investment strategist at Johnson Research. He said that on a technical basis, the next important price levels for crude are $100, then $90.
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