- The Washington Times - Friday, October 13, 2000

Escalating violence in the Middle East yesterday sent crude oil prices soaring and stocks skidding in a landslide that took 379 points off the Dow Jones Industrial Average its fifth-biggest loss.
What started as an upbeat day in New York quickly got shattered by news of a terrorist attack on a U.S. warship in Yemen. Fears rippled through world financial markets that fast-rising tensions between Israel and Palestinians could spread into a larger conflict that threatens oil supplies.
Crude prices skyrocketed 11 percent to $37 a barrel, near a 10-year high, before settling back to $36.06 at the close on the New York Mercantile Exchange. The spike in oil prices set off a chain reaction in the stock market that got uglier as the day continued.
The blue chip Dow led the downward spiral as investors fled the stocks of retailers, banks, airlines and other industries that have seen their costs rise and their sales and profits fall already this year because of the jump in energy prices. The Dow ended down 3.6 percent at 10,034.
The Nasdaq Composite Index, already beleaguered by news of disappointing earnings from corporate stars like Intel, Dell and Motorola, lost further ground and ended down 95 points at 3,074 its lowest close this year. The popular technology stock barometer has lost nearly a quarter of its value after posting a record 81 percent gain last year.
"For the last five weeks, we've been tattered and torn by poor earnings announcements, and then we get hit by this Middle Eastern news," said Bryan Piskarowski, a stock trader at Prudential Securities in New York.
Rising energy prices already were hurting stocks, he said, but most traders thought they had seen the worst when oil prices spiked to $37.80 last month before the Clinton administration intervened and cooled prices down with a release of one million barrels of oil from the Strategic Petroleum Reserve.
The United States consumes 19.6 million barrels of crude oil a day.
Yesterday, some analysts said the Mideast turmoil could send oil prices as high as $40 a barrel. Iran announced yesterday that the attack in Yemen would not affect oil exports from the Persian Gulf, and that sentiment was echoed by several other centrist Arab states that produce oil.
But analysts note that Iraq and other hard-line states have yet to show their cards. Even Saudi Arabia, a close U.S. ally in the region, had warned before yesterday's attack that it would "respond appropriately" to any Israeli attacks on its Arab neighbors.
"Everyone knows the U.S. would back Israel" if the situation escalates and people end up choosing sides, said Robert Ebel, director of energy and the national security program at the Center for Strategic & International Studies in Washington. "The Arabs could use their only weapon: oil."
The renewed uncertainty over oil prices was too much for the troubled stock market. "The markets do not like unexpected, unsettling events, and that's exactly what we got today," Prudential's Mr. Piskarowski said. "It served to catalyze the negative sentiment."
Events in the Mideast will continue to be the focus on Wall Street today, he said, adding that stocks may not have yet hit bottom.
"People are looking for shelter, and they can't find it" in stocks, he said. Many investors fled into Treasury bonds, a traditional safe haven during times of international crisis.
Another factor adding to the "extreme volatility" of the market right now is the presidential election, Mr. Piskarowski said. "We're moving into a politically charged time in the United States."
Also casting a pall over stocks yesterday was an announcement by Home Depot that its profits will miss expectations on Wall Street.
Stocks joining Home Depot in the drubbing included Wal-Mart, Continental, Delta, General Electric, Citigroup and Wells Fargo. Oil stocks like Texaco, Conoco and Unocal soared, by contrast, on the rise in oil prices. Three stocks fell for every one that rose on the New York Stock Exchange.
"We're going into a difficult market environment, where profit margins are going to be under a lot of pressure," said Wayne Nordberg of KBW Asset Management Inc.
The jump in crude prices also sent the price of home-heating oil soaring by 6 percent yesterday to $1.08 a gallon on the mercantile exchange. The price of natural gas, which is used to heat half of American homes, joined the parade and rocketed to a new record high.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide