Stocks Fold as Oil Runs to Record

The indices can't withstand a second day of pressure.
Author:
Publish date:

Updated from 4:04 p.m. EDT

Blue chips tumbled on Wall Street Wednesday as storm-driven oil spiked to a new record high ahead of earnings season.

The

Dow Jones Industrial Average

fell 101.12 points, or 0.97%, to 10,270.68. The

S&P 500

lost 10.05 points, or 0.83%, to 1194.94. The

Nasdaq

, which was up most of the session, slipped 10.10 points, or 0.49%, to 2068.65. The 10-year Treasury bond was up 9/32 in price to yield 4.07%, while the dollar was higher against the yen and euro.

About 1.44 billion shares changed hands on the

New York Stock Exchange

, with decliners beating advancers by a 9-to-7 margin. Trading volume on the Nasdaq was 1.59 billion shares, with decliners outpacing advancers 3 to 2.

August crude settled up $1.69 to $61.28 a barrel, a new closing high, after Tropical Storm Cindy made landfall along Louisiana with sustained winds of 70 mph. Officials estimate that about 3% of the Gulf of Mexico's oil and gas production was curtailed by the storm, which is being trailed by another potential hurricane, Dennis.

"The market is caught between higher oil and earnings season," said Paul Nolte, director of investment at Hinsdale Associates.

Only two of the Dow's 30 components finished in the green:

Hewlett-Packard

(HPQ) - Get Report

and

IBM

(IBM) - Get Report

. The biggest losers included

Exxon Mobil

(XOM) - Get Report

,

United Technologies

(UTX) - Get Report

and

Home Depot

(HD) - Get Report

.

Wednesday's economic news was mixed. The Institute for Supply Management's nonmanufacturing index came in slightly stronger than expected, printing 62.2 compared with expectations of 58.7. Earlier, the Mortgage Bankers Association said mortgage applications rose 9.6% last week, after two consecutive declines.

"While the ISM reading is a bit higher than we expected, it is within the normal bounds of variation," said Ian Shepherdson, chief economist with High Frequency Economics. "It is possible, however, that the survey might be telling us something more immediate about June retail sales."

Stronger sectors Wednesday included technology, semiconductors and biotech. Energy, health care, retail, airlines and telecom services were among the weaker-performing areas.

"The bulls still have a long way to go," said Ken Tower, chief market strategist with CyberTrader. "Yesterday, the energy sector outperformed all other sectors by a large margin. Unfortunately, this was not bullish for the market as a whole."

The day's biggest stock story involved two health insurers.

UnitedHealth

(UNH) - Get Report

agreed to acquire

PacifiCare

(PHS)

for $8.1 billion of cash and stock. PacifiCare retraced early gains but still finished up 6.1% at $77.09.

Otherwise, corporate news remained light heading into the second-quarter earnings season, with a dearth of profit warnings so far. One exception Wednesday was

Zoll Medical

(ZOLL)

, which cut its third-quarter EPS forecast to break-even from 10 cents and said sales also will miss estimates. Zoll fell by $2.87, or 10.5%, to $24.51.

General Motors

(GM) - Get Report

could see a $253 million windfall after a federal judge said the government is liable for part of the pension obligation of a division the automaker sold in 1993. The division, Allison Gas Turbine, was a big federal contractor. Shares lost 55 cents, or 1.6%, to $34.22.

The Food and Drug Administration granted priority review to

OSI Pharmaceuticals'

(OSIP)

Tarceva for treatment of pancreatic cancer. The milestone triggers a $7 million payment to OSI from marketing partner

Genentech

(DNA)

. OSI was higher by 1.8%, up 71 cents to close $41.11.

Zions Bancorp

(ZION) - Get Report

agreed to buy

Amegy Bancorporation

(ABNK)

for about $1.7 billion, a 1.5% premium to Amegy's closing price on Tuesday. Zions lost $4.69, or 6.4%, to $68.67, while Amegy was off $1.05, or 4.6%, to $21.93.

GE Commercial Finance, a division of

General Electric

(GE) - Get Report

, said it will acquire $1 billion in aircraft assets from

CIT Group

(CIT) - Get Report

. Terms were undisclosed. GE fell 40 cents, or 1.2%, at $34.32, while CIT gained 65 cents, or 1.5%, to $43.25.

Shares of

Ultralife Batteries

(ULBI) - Get Report

gained 4.3% after the company announced it has won a $25 million contract from GM to supply backup batteries for the automaker's OnStar systems. Ultralife added 71 cents to $17.07.

Among research calls, Deutsche Bank initiated

Warner Music

(WMG)

with a buy and set a $22 price target, citing opportunities in digital media. Warner Music was lower by a penny to close at $15.99.

SunTrust advised clients to buy specialty retailer

Aeropostale

(ARO)

up to $39, saying its fall apparel offerings look attractive. The stock was off $1.16, or 3.3%, to end the session at $33.81, still up about $9 since late May.

After the bell Wednesday,

Ruby Tuesday

(RI)

will report fourth-quarter earnings. Analysts are expecting EPS of 41 cents, according to Thomson First Call. Ruby Tuesday slid by $1, or 3.7%, to $25.80.

Overseas markets were mostly higher, with London's FTSE 100 recently up 0.6% to 5223 and Germany's Xetra DAX adding 0.1% to 4610. In Asia, Japan's Nikkei eased 0.1% overnight to 11,604, while Hong Kong's Hang Seng rose 0.2% to 14,150.

To view Aaron Task's video take on today's market, click here

.