Wednesday, October 13, 2004

NEW YORK (AP) — Soaring oil prices trumped positive earnings news yesterday, sending stocks skidding as investors rushed to take profits on new fears that the market is in the midst of a commodities bubble.

Stronger-than-expected profits at chip bellwether Intel Corp. and an upbeat outlook from McDonald’s Corp. cheered Wall Street early in the session. But rising crude prices quashed those gains as oil traders nervously handicapped weekly inventory numbers expected today.

Anticipation of the report today on weekly jobless claims also spooked buyers — particularly after disappointing employment data for September released last Friday. That, combined with surging energy costs and worries about decelerating earnings, contributed to Wall Street’s concerns.

“There is so much uncertainty in the market right now, and it is playing itself out as fear: the fear of being overcommitted to stocks,” said Ken Tower, chief market strategist for Schwab’s CyberTrader.

The Dow Jones Industrial Average slumped 74.85, or 0.74 percent, to 10,002.33.

Broader stock indicators also were lower. The Standard & Poor’s 500 index declined 8.19, or 0.73 percent, to 1,113.65. The Nasdaq Composite Index shed 4.64, or 0.24 percent, to 1,920.53, propped up somewhat by strength in the semiconductor industry.

Crude oil futures opened lower, a day after trading above $54 per barrel, raising hopes for a better economic picture by the end of the year. But as oil traders became less bullish about U.S. inventories and worries grew about Hurricane Ivan’s lingering effect on production in the Gulf of Mexico, prices began to soar. Light, sweet crude for November delivery surged $1.13 to settle at $53.64 per barrel on the New York Mercantile Exchange.

Even as oil rallied, however, commodity-dependent stocks foundered, pressuring blue chips. On the Dow, Alcoa Inc., the world’s largest aluminum producer, lost $1 to $32.19, and Exxon Mobil Corp. closed down 89 cents at $48.48. Other energy stocks also suffered: Chevron Texaco Corp. shed $1.16 to $53.31 and Occidental Petroleum Corp. lost 3.6 percent, or $2.04, to $54.91.

Analysts blamed the declines on growing fears about a possible bubble in commodities prices, and worries they were due for a correction soon in the face of slowing global demand, particularly in China, and cooling economic growth at home.

Intel gained 3.5 percent, or 71 cents, to $20.99, after beating Wall Street forecasts by 3 cents per share, although analysts’ estimates were reduced after a disappointing mid-quarter update from the semiconductor maker. Other chip stocks also gained, with Advanced Micro Devices Inc. climbing 14 cents to $13.84 and National Semiconductor Corp. rising 3 percent, or 46 cents, to $15.69.

McDonald’s emerged as the best-performing stock on the Dow, rising 4.8 percent, or $1.31, to $28.86, after it projected earnings of 61 cents per share in the third quarter, crediting a stronger tax situation and better worldwide sales for its upgraded outlook. Analysts had been expecting earnings of 49 cents per share.

Yahoo Inc. gained 73 cents to $34.96 after quadrupling profits from a year ago.

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