Updated from 4:09 p.m. EDT
Stocks finished at their lowest closing levels of the year Monday after the assassination of the president of the Iraqi governing council highlighted growing unrest in the Middle East, sending oil prices to new highs and spreading fears of a global energy crisis.
After setting a new intraday low for the year at 1865, the
led declines, closing down 27.61 points, or 1.45%, to 1876.64. The
Dow Jones Industrial Average
fell 105.96 points, or 1.06%, to 9906.91, and the
was down 11.62 points, or 1.06%, to 1084.08. The 10-year Treasury note, reprising its role as a safe haven amid world turmoil, was up 19/32 to yield 4.69%, while the dollar was higher against the yen and lower against the euro.
Volume was light to moderate, as the lack of enthusiasm for tech issues extended the recent trend of similar volume on the two exchanges. About 1.4 billion shares exchanged hands on the
New York Stock Exchange
, where decliners more than doubled advancers in breadth. Volume was lighter than average on the Nasdaq, with just over 1.5 billion shares changed hands and decliners more than tripled advancers.
In a minor victory, the S&P 500 was able to remain above its 200-day moving average of 1078. That level has proved a major support for the broader markets in recent declines.
Phillip Roth, chief technical market analyst at Miller Tabak & Co., said he thinks it's significant that the broader markets have made lows during all the recent selloffs in roughly the same place. "It looks like there's some support here," he said. "Having said that, we've still got to rally. Not going down is one thing, which is sort of what's happened here last week, but we really need to see some signs of strength, with volume and volatility on the upside."
"I think it's unlikely that we'll get a rally driven by goods news," he added. "I think the rally will come because the market has discounted all the bad news. We had a big rise in long-term interest rates and on top of that we have some deadly international news, so given all of that, you have to say that things are holding together pretty well."
Monday's losses began with news that the Iraqi governing council president Abdel-Zahraa Othman, also known as Izzedine Salim, was killed, along with three other Iraqis, in a car bombing in central Baghdad. The killing comes about 45 days before the scheduled transfer of power to an Iraqi interim government June 30. Later, a report emerged that a shell containing nerve gas exploded in Iraq shortly after its discovery by U.S. troops. Two soldiers were treated for minor injuries.
Othman was the second member of the governing council to be killed since it was set up in July.
"As it becomes increasingly clear that Iraq, and the entire Middle East for that matter, is not stable, it will raise questions about oil," said Hugh Johnson, chief investment officer of First Albany. "People like to say that Iraq has a damaging impact on investors' psychology. That may be true, but an even more poignant truth is that it takes a chunk out of the U.S. economy as oil prices rise, and it clouds the outlook for the economy and earnings.
"From a heartless, cold-hearted, dollars-and-cents point of view, it's not about psychology," Johnson added. "It is about the cold, hard facts about the politics of oil. I hate to say it, but that's what it is. That's not to say that's why we're there. We're there for ideological reasons, but don't kid yourself -- if you work on Wall Street, there's more than ideology at stake here."
Oil futures trading on the Nymex settled at a new all-time high, up 17 cents to $41.55.
While losses were felt across the spectrum in the marketplace, the technology sector bore the brunt of the selling, with the Amex Network Index losing 2.8%, the CBOE Software Index off 2% and the Amex Biotech Index down 1.5%. Investors looked to gold stocks for shelter from the storm, reflected by a 1% jump in the CBOE Gold Index, and oil service and real estate stocks were lonely bright spots with modest gains.
In corporate news, shares of
dropped 18 cents, or 5.5%, to $3.10 after
The Wall Street Journal
reported that the SEC would fine the telecom-equipment maker $25 million for not fully cooperating with an accounting investigation. Regulators will also reportedly charge the company with improper recognition of $1 billion in revenue.
shares also suffered from a pending legal situation, down 31 cents, or 8.7%, to $3.26. The company said on Friday that a U.S. grand jury had subpoenaed its records as part of a criminal investigation. Nortel fired its chief executive late last month and warned that accounting problems, already under investigation by regulators, loomed.
continued on its recent acquisition binge, agreeing to pay $1.1 billion of natural gas and oil fields from
. ChevronTexaco will part with 150 onshore properties in seven U.S. states, most of them in New Mexico and Texas. Shares of XTO added 5 cents, or 0.2%, to $26.66, while ChevronTexaco lost 41 cents, or 0.4%, to $91.55.
Home improvement retailer
said first-quarter earnings rose to $455 million, or 57 cents a share, in the first quarter, up from $421 million, or 53 cents a share, last year. Analysts had been forecasting earnings of 54 cents a share in the latest quarter. Lowe's benefited from a 9.9% jump in same-store sales amid strong real estate markets. Its stock closed down 90 cents, or 1.8%, to $49.68.
reported a jump in first-quarter earnings that was in line with expectations. The retailer posted adjusted net income of $67.8 million, or 13 cents a share, compared with $49.8 million, or 9 cents a share, in the year-ago period. In its current quarter, the company forecast earnings at the low end of its previous guidance of 23 cents to 26 cents a share. Its stock closed down 59 cents, or 3%, to $19.29.
Toys R Us
disappointed Wall Street, posting a wider first-quarter loss due to weakness at its U.S. toy stores. It posted a loss of $28 million, or 13 cents a share, compared with a loss of $26 million, or 12 cents a share, in the same quarter last year. Its shares lost 24 cents, or 1.7%, to $14.14.
Overseas, stock markets sold off, with London's FTSE down 0.9% to 4403 and Germany's Xetra DAX losing 1.3% to 3754. In Asia, Japan's Nikkei closed down 3.2% to 10,505 and Hong Kong's Hang Seng lost 2.8% to 10,968.
On Tuesday, the real estate market will take center stage at 8:30 a.m. EDT, when the government is scheduled to release April's data on housing starts and building permits. Housing starts are expected to decline to an annualized 1.988 million from the 2.007 million reported for March. Building permits are expected to drop to 1.94 million from 1.976 million.
Before the opening bell, a slew of major retailers will report earnings, including
Barnes & Noble
After the bell Tuesday, tech investors will closely watch earnings from