US stocks fall as commodity prices drop
Declining oil prices and weakness in other commodities sent stocks lower today, as investors took profits and beat up the stocks that led Wall Street’s early January rally.
Gold, silver, oil – “anything you can drop on your foot and it hurts” – is retreating, said Gary Kaltbaum, a money manager in Orlando, Florida.
The run up in commodities prices “went too far too fast,” he said. Copper prices, for instance, broke through $4,000 a ton three months ago and passed $5,000 a ton last week, according to Merrill Lynch.
Investors sold off oil-sector stocks after oil futures dropped more than two dollars a barrel, but they didn’t move their money into financial or semiconductor stocks, as they did the last time oil dropped, said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
“A lot of (the selling) is technical,” he said. “People are selling off the winners they had in January.”
The Dow Jones industrial average fell 48.51, or 0.45%, to 10,749.76.
Broader stock indicators were also lower. The Standard & Poor’s 500 index fell 10.24, or 0.81%, to 1,254.78, and the Nasdaq composite index fell 13.84, or 0.61%, to 2,244.96.
Bonds fell, with the yield on the 10-year Treasury note rising to 4.57%, up from 4.54% late Monday.
The US dollar was mixed against other major currencies in European trading. Gold prices declined.
Crude oil futures dropped as US weather remained mild, petroleum inventories remained strong and fears receded over possible disruptions to Iranian oil. A barrel of light crude settled at $63.09, down $2.02, in trading on the New York Mercantile Exchange.
The mood on the Street seems to have changed, with investors returning to the jitters that largely defined 2005.
While Tuesday’s earnings surprises were positive, with Walt Disney and Emerson Electric, beating analysts’ expectations, they weren’t enough to send the indexes higher.
“For some reason, the market wants to focus on other things,” said Philip S Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. The message, he said, is that investors aren’t enamored with stocks and are waiting for a big catalyst that will lift stock prices.
One measure of the sentiment shift: One of the Street’s most bullish strategists, Prudential Financial’s Ed Keon, cut his recommended stock weighting to 55% this week from the 100% allocation he has recommended since July.
In a note this week he wrote: “The bull case for US stocks took some hits last week. The weak GDP (gross domestic product) report led to an apparent drop in productivity and higher than expected rise in unit labor costs,” which hurt the case for lower inflation.
He added first-quarter corporate earnings expectations, without energy stocks, “might not be much above zero” and said the situation in Iran heightens uncertainty.
Google Inc. illustrated the market’s “in today, out tomorrow” mentality. The stock fell 17.18, or 4.5%, to $367.92, as poor sentiment around the stock carried over from its earnings report on February 1, which came in below analysts’ expectations.
Apple Computer Inc. rose 30 cents to $67.60 after the technology company introduced a new iPod music player at a discounted price. The company also cut prices on some already available iPods.
Coca-Cola Co. rose 9 cents to $41.03 after the world’s largest beverage maker’s fourth-quarter profits dropped 28%, but beat analysts’ expectations, once items were excluded.
Industrial equipment maker Emerson Electric rose $2.09 to $78.96 after profit for its first-quarter jumped by about one-third, helped by improved sales at its automation, climate-control, and appliance and tool segments. The company also increased its guidance for fiscal 2006.
General Motors Corp., struggling with billions of dollars of losses in North America, said it is cutting in half its yearly dividend to $1 a share and reducing the salaries of its chairman and senior leadership.
The announcements came a day after a top aide to billionaire investor Kirk Kerkorian was elected to GM’s board. Before the dividend cut, GM’s yield was 8.6%, the highest of the 387 issues in the S&P 500 that pay a cash dividend. GM fell 53 cents to $22.81.
The Russell 2000 index of smaller companies fell 10.71, or 1.47%, to 717.18.
Declining issues led advancers by more than 2 to 1 on the New York Stock Exchange, where volume was 1.53 billion shares, up from 1.76 billion at the same time Monday.
