Updated from 4:05 p.m. EST
Record high oil prices and a profit warning by
hammered stocks Wednesday, taking them further from the near four-year highs touched at the beginning of the month.
Dow Jones Industrial Average
closed down 112.03 points, or 1.04%, to 10,633.07, it biggest loss since Feb. 22; the
fell 9.68 points, or 0.81%, to 1188.07; and the
was down 19.23, or 0.94%, to 2015.75, its lowest level since late Janaury.
Closing volume on the
New York Stock Exchange
was 1.6 billion shares, with decliners beating advancers by a ratio of 7 to 2. Volume on the Nasdaq was 1.9 billion shares, with decliners outpacing advancers by a 6-to-3 margin.
In other markets, the 10-year Treasury note was up 10/32 in price with the yield down to 4.50%, after hitting a seven-month high yesterday. The dollar was weaker against the yen and euro.
GM said that rather than break even in the current quarter, as it has previously predicted, it will probably lose $1.50 a share before special items. Full-year guidance went from earnings of $4 to $5 a share to earnings of $1 to $2 a share. The company cited lower production volume and a bad sales mix. Its shares ended 14% lower at $29.02.
"We have entered earnings warnings season, and GM has started it off with a bang," says Paul Cherney, chief market analyst at S&P. "Today's announcement might keep a lot of the longs in check -- at least until the Fed meets next week."
"GM is bringing down the market because they are talking about high health care costs, skyrocketing materials costs and pension costs," said Rich Yamarone, chief economist at Argus Research. "People are afraid that's going to be the case for every manufacturer out there."
The April crude contract closed up $1.41 to $56.46 a barrel, eclipsing its previous intraday peak of $55.67, after the Energy Department said U.S. distillate stocks fell 1.9 million barrels last week. The same report showed a 2.6-million-barrel build in crude stocks and a 2.9-million-barrel decline in gasoline inventories.
Oil had been lower earlier, following an OPEC decision to pump an additional 500,000 barrels a day to combat rising prices. The Saudi oil minister is quoted in news reports calling current prices high and saying the cartel wants them between $40 and $50 a barrel.
"Every time we have a down day its because of oil," says Larry Perruzi, equity trader at Boston Company Asset Management. "And today oil had a friend in GM's warning."
On the economic front, the government reported that the current account deficit widened to $187.9 billion in the fourth quarter, more than the consensus forecast of $183 billion. The gap was $164.7 billion in the third quarter.
In another report, housing starts rose to an annualized rate of 2.19 million units, vs. 2.16 million in January. Economists expected a dip to 2.04 million.
said industrial production increased 0.3% in February, slightly less than expected but better than a revised 0.1% increase in January. Meanwhile, factories operated at 79.4% of capacity, better than the consensus forecast and the previous month.
In corporate news, the break between
American International Group
and ousted CEO Maurice Greenberg is reportedly more severe than originally believed. Greenberg agreed to retire as CEO Monday amid growing regulatory scrutiny of the insurers business dealings. The
Wall Street Journal
reported Wednesday that AIG's board might seek to strip him of his nonexecutive chairman title before the term is scheduled to end.
Research In Motion
( RIMM) jumped Wednesday after agreeing to pay $450 million to end litigation that had threatened its ability to produce the BlackBerry communicator. Under the pact with NTP, RIM receives the "unfettered right" to develop, sell and sublicense the popular wireless technology.
RIM shares finished up $12.08, or 18%, to $79.17. Shares of
, which both competes with and licenses BlackBerry, fell 18 cents, or 1.1%, to $16.15.
Another technology company,
, soared after the bell Tuesday on news that
agreed to distribute its software and collaborate on network management products. This is Opnet's first major indirect sales channel, and the shares closed up $1.73, or 24%, to $8.89.
Overseas markets are mixed, with London's FTSE 100 finishing down 1.25% to 4937 and Germany's Xetra DAX falling 1.8% to 4309. In Asia, Japan's Nikkei rose 0.4% overnight to 11,873, while Hong Kong's Hang Seng gained 0.1% to 13,833.