Wall Street retreated today as continuing violence in the Middle East reminded investors that the market could face problems beyond the recession.
The collapse of a Dow Chemical joint venture, meanwhile, intensified the Wall Street economic worries.
Investors remained cautious in a holiday-shortened week, unwilling to make many big bets in the final three days of trading for 2008. Israel’s escalating attacks against Gaza’s Hamas rulers made traders more hesitant to buy.
The tensions pushed oil prices above 40 dollars (€28.70) a barrel during the session, with crude closing up 2.31 dollars at 40.02 (€28.70) dollars a barrel on the New York Mercantile Exchange. Oil has fallen more than 100 dollars (€71.72) from its peak of 147.27 dollars (€105.43) a barrel on July 11 as a slowing economy curbed demand.
Todd Leone, managing director of equity trading at Cowen & Co, said trading volume was extremely light and that was contributing to the market’s swings. Low volume tends to skew price movements.
“What’s going on in Israel didn’t read well over the weekend,” Leone said. “Beyond that, it is an incredibly quiet session. It’s really not taking much to move the markets.”
Investors also digested a potential blow to deal making on Wall Street. On Sunday, Kuwait’s government cancelled its 17.4 billion dollar (€12.48 billion) K-Dow Petrochemicals joint venture with Dow Chemical, saying it was “very risky” because of the global financial crisis and low oil prices. The joint venture was set to begin Thursday.
Rohm & Haas maintains that its proposed 15.3 billion dollar (€10.98 billion) takeover by Dow Chemical won’t be affected by Dow’s substantial loss of income from the venture. But investors punished shares, driving them down 9.60 dollars, or 15.1%, to 53.96 dollars. Dow Chemical shares lost 3.15 dollars, or 16.3%, to 15.35 dollars.
According to preliminary calculations, the Dow Jones industrial average fell 31.62, or 0.37%, to 8,483.93.
Broader indexes also declined. The Standard & Poor’s 500 index fell 3.42, or 0.39%, to 869.38; the Nasdaq composite index fell 19.92, or 1.30%, to 1,510.32.