- The Washington Times - Tuesday, August 3, 2004

NEW YORK (AP) — Another surge in oil prices and a sharp drop in consumer spending rattled investors yesterday, sending stocks lower and hitting the technology sector particularly hard.

The market, already smarting from record high prices for oil, took another blow as U.S. crude prices jumped above $44 a barrel for the first time.

“It is built into the price of everything,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “As a result, it could raise the cost of products, which is inflationary, and cut into earnings,” he said. “It’s that basic … that far-reaching.”

The Dow Jones Industrial Average fell 58.92, or 0.6 percent, to 10,120.24. The decline halted the Dow’s longest winning streak since November, a five-session advance of 217 points that lifted the blue-chip measure back above 10,000.

Broad market indicators also dropped. The Nasdaq Composite Index fell 32.67, or 1.7 percent, to 1,859.42, while the Standard & Poor’s 500 index fell 6.93, or 0.6 percent, to 1,099.69.

Stocks had been trading in a narrow range in recent weeks as investors worried about rising interest rates and energy prices. Although the market overcame Monday’s jitters over record oil prices and new threats of terrorism in the United States, sellers prevailed as the backdrop worsened yesterday.

As oil prices continued their climb, investors feared that consumers and businesses could face even higher fuel costs in coming months.

The contract for September delivery of light crude rose 33 cents to $44.15 on the New York Mercantile Exchange, the third straight closing record. On London’s International Petroleum Exchange, September Brent crude rose 67 cents to a new high of $40.64.

Meanwhile, before the open on Wall Street, the Commerce Department reported that consumers slashed their spending in June by the largest amount in three years, reinforcing other recent indications that the economic recovery slowed at the end of the second quarter.

The report said consumer spending dropped by a sharp 0.7 percent in June from the previous month. In May, consumers had ratcheted up spending a strong 1 percent. Americans’ incomes rose 0.2 percent in June, weaker than the 0.6 percent increase the previous month. Both numbers were weaker than analysts had expected.

Richard E. Cripps, chief market strategist for Legg Mason in Baltimore, said the market’s modest decline bodes well.

“The market is indicating that the selling we had in July has pretty much run its course; it was a pretty vicious month,” he said. “If we can get oil prices down a buck or two, we’ll see a nice market gain.”

Technology shares figured prominently among the Dow’s decliners, with International Business Machines Corp. falling 98 cents to $85.71 and Intel Corp. falling 73 cents to $24.17. The Dow’s biggest decliner was Caterpillar Inc., down $1.42 at $71.68.

Rising crude prices helped Exxon Mobil Corp. buck the trend, gaining 64 cents to $46.89.

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