Gaza conflict, recession shake stocks

Investor worries about the future of the high-tech sector because of the recession, the collapse of a joint venture involving Dow Chemical and a spike in oil prices because of Israel’s assault against Gaza conspired to push Wall Street into negative territory during light volume Monday.

All of the major indexes came off their lows, which at one point fell by more than 1 percent on the first day of a second consecutive four-day holiday week.

At the close, the Dow Jones Industrial Average dropped 31.62 points, or 0.37 percent, to 8483.93. The tech-heavy Nasdaq sank 19.92, or 1.30 percent, to 1510.32. The broader Standard & Poor’s 500 dipped 3.38, or 0.39 percent, to 869.42.

Concerns about the recession’s effects on consumer and business spending on computer and software upgrades in the months ahead apparently had an impact on the markets, with most large-cap tech stocks of companies with more than $5 billion in capitalization losing ground.

That affected both the Nasdaq and the S&P; 500, where tech is the largest economic sector. Tech has fallen 45 percent in value this year.

Another blow to the markets was a decision by Kuwait to kill a joint venture with Dow Chemical worth $17.4 billion that could ruin Dow’s plans to buy rival Rohm & Haas for $15.4 billion.

Share prices of both Dow and Rohm & Haas plunged. Cancellation of the purchase only would add to the long list of deals that have collapsed this year because of tight credit and the poor performance of the stock markets.

Israel’s air assault against neighboring Gaza in a major offensive that is intended to stop rocket attacks from the area, and the massing of armor and troops at the border for a possible ground incursion, affected oil prices because of fears that oil shipments from elsewhere in the Middle East could be disrupted.

The price of a barrel of light sweet crude oil, which fell slowly all last week, jumped to more than $42 in Europe in electronic trading on the New York Mercantile Exchange. It later fell back to $40 because demand for the commodity remained low.

“In order to get above $50, $60 a barrel, we’re going to need to see demand increase,” Tom Reilly of SCS Commodities Corp., an energy brokerage firm, told CNBC.

He predicted that the price of oil could drop to $30 a barrel.

Oil peaked in price July 11, when it topped out at $147.27 a barrel, spurring gasoline prices at the pump to shoot higher than $4 a gallon nationwide.

Since then, falling gasoline prices have been a bright spot for consumers. The drop in fuel costs, combined with dealer sales incentives, led to resurging sales of sport utility vehicles and trucks, which Edmunds.com says will account for 51 percent of all vehicles sold nationwide in December, according to CNNMoney.com.

At the same time, sales of gas-saving hybrid vehicles were expected to drop this month in an about-face that some worry may alter plans, at least temporarily, to spend more money on alternative energy sources to reduce U.S. dependence on foreign oil.

The average price of regular gasoline has fallen to $1.67 a gallon, according to the AAA.

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