Stocks Choking on Crude Oil Prices

All three major indices are losing ground as traders deal with negative corporate news.
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Updated from 12:20 p.m. EDT

Stocks in the U.S. were sinking Wednesday as oil once again rampaged into uncharted territory and investors saw no relief in negative-leaning corporate news.

Following a mildly positive start, the

Dow Jones Industrial Average

quickly reversed course and recently sank 75 points to 12,753. The

S&P 500

was down 3 points at 1410, and the

Nasdaq Composite

was off 4 points to 2488.

That came after the newly benchmarked July crude contract rocketed to a new all-time high of $132.70 a barrel on word stockpiles declined 5.4 million barrels last week, according to the Energy Information Administration. Recently, futures eased to a $3.58 gain at $132.56.

Oil-and-gas firms were climbing on the news.

Exxon Mobil

(XOM) - Get Report

,

Chevron

(CVX) - Get Report

,

ConocoPhillips

(COP) - Get Report

, and

Royal Dutch Shell

(RDS.A)

were up between 1% and 4% apiece.

"Oil is clearly working in making this two-day selloff seem a lot better," said Paul Mendelsohn, chief investment strategist with Windham Financial, "Without them, we probably be down another 140, 150 points

on the Dow."

Gold futures were tacking on $6.80 to $927 an once. The U.S. dollar had another weak day, losing 0.6% to the euro at $1.5753 and softening by 0.2% against the yen at 103.62.

Helping to drag down equity measures, meanwhile, was the financial sector, as the

NYSE

Financial Sector Index and the KBW Bank Index plummeted 1.5% apiece.

The Wall Street Journal

reported that some big banks, having bet against indexes that track real estate securities and leveraged loans, may have seen their hedging strategies backfire amid the market's rebound over the past few months.

The paper named

Lehman Brothers

(LEH)

as possibly the worst hit here, and said it's likely that

Morgan Stanley

(MS) - Get Report

has also been hurt. Shares slid 5% and 4.5%, respectively, as fellow brokerages

Goldman Sachs

(GS) - Get Report

and

Merrill Lynch

(MER)

gave up 1.4% and 2.8%.

Elsewhere in the financial space, Dow components

Citigroup

(C) - Get Report

,

Bank of America

(BAC) - Get Report

, and

JPMorgan Chase

(JPM) - Get Report

sank 1.9% or more.

Investors also appeared jarred by a

Financial Times

report saying that

Moody's

(MCO) - Get Report

mistakenly gave triple-A ratings to billions of dollars in debt before fixing the error in early 2007. Moody's itself was slumping 12.6%.

At the same time, American Airlines parent

AMR Corp.

(AMR)

tumbled 21.8% after saying it will

reduce domestic flights and staff capacity

by 11% to 12% in the fourth quarter, citing agonizing fuel costs and a tough macro environment overall.

That seemed to weigh on aircraft maker

Boeing

(BA) - Get Report

, which lost 3% to become one of the day's worst-performing Dow components.

Soleil downgraded AMR and United operator

UAL Corp.

(UAL) - Get Report

to sell while cutting

Continental

(CAL) - Get Report

to hold from buy, and Lehman Brothers sliced its price targets on all three. UAL shares fell 13.9%, and Continental lost 11.3%.

Lehman Brothers eased its price targets on several other airline stocks, as well, including

U.S. Airways

(LCC)

,

Northwest

(NWA)

,

Jetblue

(JBLU) - Get Report

, and

Delta

(DAL) - Get Report

. Shares of the companies shed between 5.5% and 14.1%.

Meanwhile, Dow component

Hewlett-Packard

(HPQ) - Get Report

confirmed that fiscal second-quarter earnings

climbed 16%

to $2.1 billion on rising revenue of $28.3 billion. The results were in line with what the computer maker announced last week, when the company simultaneously said it had

agreed to buy

EDS

(EDS)

for $13.9 billion.

H-P shares were down 2.8%.

At the same time,

Time Warner

(TWX)

said it will

spin off

its

Time Warner Cable

(TWC)

business. Shares were adding 1.4% and 3.4%, respectively.

Back in earnings, TurboTax software maker

Intuit

(INTU) - Get Report

topped Wall Street estimates

with adjusted earnings of $1.39 a share. Revenue jumped 15%, and the company issued in-line guidance for the current quarter. Shares tracked 5.7% higher.

Analog Devices

(ADI) - Get Report

, booked a climbing profit for last quarter and set out bullish guidance for the next, but the chipmaker's gross margin was also down slightly from the prior quarter. The stock gave up 3.2%.

Treasury prices were slipping. The 10-year note was off 14/32 in price to yield 3.83% and the 30-year bond lost 19/32 in price, yielding 4.57%.

The major overseas markets were mostly falling. In Asia, Tokyo's Nikkei 225 dropped 1.7% overnight, but the Hang Seng Index in Hong Kong added 1.2%. Among European bourses, London's FTSE 100 was ticking up 0.1%, and Germany's Xetra Dax surrendered 1.1%. The Paris Cac moved down 0.5%.