Stocks fall as oil prices soar to $122 a barrel

Tuesday, May 06, 2008 - 03:52 PM

By MADLEN READ
AP Business Writer

NEW YORK

Stocks declined Tuesday for a second straight session, with investors tentative as crude oil surged to another record high and more companies prepared to release quarterly earnings reports.

Extending its sharp ascent, crude oil climbed past $122 a barrel on the New York Mercantile Exchange as traders reacted to the weakening U.S. dollar and the possibility of supply threats. In late morning trading, it was up $1.92 at $121.89 a barrel on the New York Mercantile Exchange.

Investors´ confidence has been eroding, as high oil prices threaten to weigh on consumers´ discretionary spending well into the summer.

"We certainly seem to be waking up to stubbornly high energy prices," said Arthur Hogan, chief market analyst at Jefferies & Co. "For the first time in a couple of weeks, it seems to be grabbing all the headlines."

He added that investors were also hesitant with computer networking equipment maker Cisco Systems Inc. scheduled to release quarterly results after the market closes.

The market pared steeper earlier losses, however, as Fannie Mae shares rebounded to rise 75 cents, or 2.7 percent, to $29.04 on the belief that the government-sponsored mortgage company may have seen the worst of the credit crises. Fannie Mae on Tuesday reported a larger-than-expected first-quarter loss of $2.2 billion, and plans to lower its dividend and raise $6 billion in additional capital.

In late morning trading, the Dow Jones industrial average fell 51.22, or 0.39 percent, to 12,918.32.

Broader stock indicators also pulled back. The Standard & Poor´s 500 index fell 1.70, or 0.12 percent, to 1,405.79, and the Nasdaq composite index fell 0.62, or 0.03 percent, to 2,463.50.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.81 percent from 3.87 percent late Monday.

In recent weeks, stronger-than-expected results from companies outside the battered financial and housing sectors helped the stock market rebound late last week to levels not seen since early January.

In earnings news Tuesday, Swiss bank UBS reported a loss of nearly $11 billion and said it is reducing its work force by about 7 percent. UBS shares fell 61 cents to $33.70.

Homebuilder D.R. Horton reported a quarterly loss of $1.3 billion and halved its dividend to 7.5 cents a share. The homebuilder´s shares fell 41 cents, or 2.6 percent, to $15.56.

Meanwhile, Wachovia Corp. said it is nearly doubling its previously reported loss for the first quarter to $708 million after reviewing its portfolio of bank-owned life insurance. Wachovia´s stock fell 4 cents to $29.74.

Weakness in the financial and housing-related sectors hardly comes as a surprise to Wall Street. Still, the reports added to investors´ tendency to pare back their buying after driving the Dow last week above 13,000 for the first time since early January.

Gold climbed, while the dollar fell against most other major global currencies.

The Russell 2000 index of smaller companies rose 0.33, or 0.05 percent, to 724.68.

Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 400.3 million shares.

Overseas, Japan´s stock market was closed for a holiday. By afternoon trading in Europe, Britain´s FTSE index fell 0.92 percent, Germany´s DAX index fell 0.98 percent, and France´s CAC-40 fell 0.87 percent.

Cisco Systems and Walt Disney Co., one of the 30 companies that make up the Dow, are scheduled to release quarterly results after the market closed Tuesday.

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