Investors preoccupied with inflation extended Wall Street’s decline today, selling stocks sharply lower in response to a ballooning United States trade deficit.
The drop, which came in spite of a bullish sales outlook from Intel, left the market substantially lower for the week.
Wall Street was unnerved as the Commerce Department reported that the trade deficit widened to US$58.3bn (€43.31bn) in January, the second highest level after November’s record reading.
While the nation’s exports rose to record highs, imports rose even faster, leading investors to fear a loss of confidence in the overseas. The fell against most major currencies after the news came out.
The trade deficit sapped any momentum the market may have gained from Intel, a Dow Jones industrial, which reported late on Thursday that sales for the current quarter would be at the higher end f previous forecasts.
That bodes well for the tech sector and the overall economy, but inflation fears overshadowed the announcement.
“The economy is fairly good. Consumers are spending money. There’s strength there,” said Scott Wren, equity strategist for A G Edwards & Sons. “But with this trade deficit thing, the , and oil prices where they are, the market’s going to need a little more convincing.”
The Dow fell 77.15, or 0.7%, at 10,774.36.
Broader stock indicators also moved sharply lower. The Standard & Poor’s 500 index was down 9.17, or 0.8%, at 1,200.08 and the Nasdaq composite index lost 18.12, or 0.9%, to 2,041.60.
Inflation worries dominated Wall Street this week, with higher oil prices prompting investors to cash in profits after the previous week’s strong gains. After the Dow came within 16 points of 11,000 on Monday, it fell more than 200 points by Friday’s close. For the week, the Dow lost 1.52%, the S&P 500 slid 1.4% and the Nasdaq fell 1.8%.
The slipped lower on news of the widening trade gap, giving back earlier gains against the euro and Japanese yen. Bonds also fell as investors worried that the deficit and historically low could still trigger inflation. The yield on the 10-year Treasury note rose to 4.55%, up from Thursday’s close of 4.47%.
Oil futures spiked higher as the slipped through the morning, climbing back above 54 per barrel. A barrel of light crude settled at US$54.43 (€40.44), up 89 cents, on the New York Mercantile Exchange.
After early gains, tech stocks fell along with the rest of the market despite Intel’s bullish sales update. Intel slid 65 cents to 24.20, while rivals Advanced Micro Devices fell 63 cents to 16.39 and National Semiconductor Corp., which issued a positive earnings report during Thursday’s session, lost 30 cents to 20.82.
Kmart Holding surged 14.89, or 13.3%, to 127, reaching a new high, after analysts at UBS issued a bullish report on the discount retailer and its merger partner, Sears, Roebuck and Co. added 4.20 to 57.56 on the news.
Auto parts manufacturer Visteon Corp. climbed 64 cents, or 10.2%, to 6.90 after Ford Motor Co. agreed to financial concessions to help its former subsidiary improve its bottom line while still ensuring a steady supply of components. Ford was up 2 cents at 12.39.
Declining issues outnumbered advancers by about 8 to 5 on the New York Stock Exchange, where volume was moderate.
The Russell 2000 index of smaller companies was down 0.10, or 0.02%, at 626.84.