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New Crude High Sinks Stocks

The Dow closes 125 points below its best level of the day.

Updated from 4:14 p.m. EDT

Stocks started the day surging ahead, but another record in the price of crude oil put an end to that before the session was through Wednesday.


Dow Jones Industrial Average


, which had been as high as 10,719, ended down 21.26 points, or 0.2%, at 10,594.41. The

S&P 500


lost 2.25 points, or 0.18%, to 1229.13, and the

Nasdaq Composite


fell 16.38 points, or 0.75%, to 2157.81.

"The price of oil spiking sank the market today, taking the wind out of the market's earlier strength," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "It's just a matter of time before inflationary pressures increase as oil keeps rising. It brings us back to the question as to how aggressive the

Federal Reserve

will be in the coming months."

About 1.67 billion shares changed hands on the

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New York Stock Exchange

, with advancers beating decliners by a 9-to-7 margin. Trading volume on the Nasdaq was 1.86 billion shares, with decliners outpacing advancers 9 to 7.

Elsewhere, the 10-year Treasury was down 1/32 to yield 4.39%, while the dollar fell against the yen and euro.

Oil spiked $1.83 to close at $64.90 a barrel in Nymex floor trading, a record high. The rise came despite an Energy Department report showing that crude inventories increased by 2.8 million barrels and distillate stocks rose by 2.6 million barrels last week. Both were ahead of estimates. Gasoline inventories fell 2.1 million barrels.

"I'm not sure why were up so high this morning as we didn't have great overnight news," said Dave Briggs, head of equity trading with Federated. "We didn't have the punch or the follow-through with any conviction. The markets rolled over with oil near $65. Buyers just pulled away."

Also Wednesday,



shareholders gave preliminary approval for the company to be acquired for more than $17 billion by


(CVX) - Get Chevron Corporation Report

. Chinese oil producer


(CEO) - Get CNOOC Ltd. Report

abandoned its offer to buy Unocal after political uproar from the U.S. Chevron was higher by 71 cents, or 1.2%, to close at $61.93.

After the bell Tuesday, network equipment giant


(CSCO) - Get Cisco Systems, Inc. Report

reported a solid fourth quarter, with profits up 12% from a year ago to $1.54 billion, or 24 cents a share. Adjusted earnings of 25 cents a share matched estimates.

Cisco's stock traded lower despite guidance that is largely in line with Wall Street forecasts. The company predicted a 10% sequential decline in first-quarter sales and gross margins in the 67% range. That should come out to around 25 cents a share of earnings on revenue that is at or near the consensus estimate of $6.63 billion. Cisco was down $1.36, or 6.9%, to close at $18.25.


(DIS) - Get Walt Disney Company Report

also had a big night, reporting third-quarter earnings of $851 million, or 41 cents a share, about 3 cents ahead of estimates. Revenue of $7.72 billion was below the consensus view of $7.92 billion.

Separately, the media conglomerate was cleared of charges that directors breached their fiduciary responsibility by awarding former executive Michael Ovitz nearly $150 million in cash and stock compensation for 14 months of work in the mid-1990s. The ruling in Delaware came in a shareholder class-action lawsuit. Shares of Disney fell 67 cents, or 2.6%, to $25.47.

Another media titan,

Time Warner


, fell Wednesday after a report that corporate raider Carl Icahn is trying to form an investor group that would push for a corporate restructuring. Time Warner was down 30 cents, or 1.6%, to finish at $18.24.

Federated Department Stores


posted a second-quarter profit of $148 million, or 84 cents a share, a 90% jump from $78 million, or 43 cents, a year ago. Sales rose to $3.62 billion from $3.58 billion a year earlier. Results were in line with the Thomson First Call consensus estimates. The company said it won't issue earnings forecasts until after completing the acquisition of

May Department Stores


. Federated added 93 cents, or 1.3%, to $73.69.

Late Tuesday, Internet search engine company


reported a second-quarter loss of 20 cents a share, compared with earnings of a penny a share, a year ago. Revenue fell to $2.6 million from $4 million a year earlier. The company said it has signed an agreement with


(INSP) - Get Inspire Medical Systems, Inc. Report

that will provide's advertisers with distribution on InfoSpace. lost 7 cents, or 2.2%, to $3.07.

Earnings will pick up again Thursday with results expected from


(TGT) - Get Target Corporation Report



(KSS) - Get Kohl's Corporation Report



(DELL) - Get Dell Technologies Inc Class C Report



(NVDA) - Get NVIDIA Corporation Report


Shares of



ended up 0.4% after the company said it will pay $1 billion for a 35% stake of China's Yahoo! gained 13 cents to $34.19.

Krispy Kreme Doughnuts


said it now expects restatements to cut pretax income by about $22.2 million for fiscal years 2001 through Oct. 31, 2004. A probe by a special committee also found former Chairman Scott Livengood and former Chief Operating Officer John Tate primarily responsible for the accounting errors. Shares rose 15 cents, or 2.1%, to $7.30.

On the ratings front, J.P. Morgan upgraded



to overweight from neutral, citing the belief that Delphi has significant upside potential. The firm said that it believes the UAW will be forced into concessions with Delphi as a bankruptcy is possible and would hurt the automotive sector. Delphi was unchanged, finishing again at $5.49.

Legg Mason downgraded

(AMZN) - Get, Inc. Report

to hold from buy, saying the shares are now fully valued. Amazon lost $1.17, or 2.6%, to $44.76.

Shares of

American Express

(AXP) - Get American Express Company Report

rose Wednesday after Morgan Stanley raised its investment rating to equal-weight from underweight and pushed the price target to $55.50. The shares were higher by 91 cents, or 1.6%, to close at $56.50.

Overseas stocks were higher, with London's FTSE adding 0.3% to 5377 and Germany's Xetra DAX gaining 1.7% to 4990. In Asia, Japan's Nikkei rose 1.7% overnight to 12,098, while Hong Kong's Hang Seng rallied 2% to 15,346.

To view Gregg Greenberg's video take on today's market, click here