High oil prices push US stocks mostly lower

Investors extended their blue chip sell-off today as oil prices neared their all-time highs, renewing Wall Street’s concerns that high energy costs would deflate third-quarter earnings. Only the Nasdaq composite index managed a minimal gain.

Analysts said oil prices, which continued their climb after shooting past 48 US dollars yesterday, would keep consumer spending down and business costs rising, a combination that will squeeze profit margins and lower third-quarter earnings.

A barrel of light crude settled at 48.46 today, up 11 cents on the New York Mercantile Exchange, after reaching an intraday high of 49 dollars.

Oil prices were also blamed, in part, for a lower reading on the Conference Board’s index of leading economic indicators, the third straight monthly decline. Investors believed the forward-looking index sent a signal that economic growth has been slowing and would likely taper off through the end of the year.

“When you take a look at the leading economic indicators, it’s very clear that the price of oil is having an impact on the economy,” said Hugh Johnson, chief investment officer at First Albany Corp. “Just look at the negative earnings statements from some of the most stable companies out there. If the markets are going to move higher, we’re going to need some relief on the oil front so that the earnings picture improves.”

The Dow Jones industrial average fell 70.28, or 0.7%, to 10,038.90, the second straight day of losses and third in the last four sessions. The Dow lost more than 135 points yesterday, and is now at its lowest level since August 17.

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was down 5.20, or 0.5%, at 1,108.36, while the Nasdaq composite index gained just 0.72, or 0.04%, to 1,886.43.

Stocks listed on the tech-focused Nasdaq were generally oversold far more this year due to a weaker technology sector, and the retreat in blue chips was seen as bringing their valuations back in line with the small-cap stocks common to the Nasdaq.

The Conference Board said its Composite Index of Leading Economic Indicators fell 0.3% in August to 115.7, following a drop of 0.3% in July and larger than the 0.2% drop forecast by economists.

The index, which measures the potential for future economic growth, left Wall Street with reduced hopes for a strong finish to the year, although the Conference Board said the three months of declines were not enough to signal an end to growth entirely.

Investors’ concerns about job growth – and the resulting consumer spending - increased as the US Labour Department reported a 14,000 increase in first-time jobless claims for the week. While the hurricanes in Florida were blamed for the jump, investors have been hoping for a return to this spring’s strong job growth as a sign of strength in the economy.

“This kind of data doesn’t help because it just adds to the uncertainty that the markets are dealing with,” said Jay Suskind, head trader at Ryan Beck & Co. “You’ve got rising oil prices, economic data that’s mostly OK, questions about jobs and a presidential election all weighing things down.”

Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume was light.

The Russell 2000 index of smaller companies was down 0.09, or 0.025, at 565.80.