GLOBAL MARKETS-U.S. stocks fall as
oil jumps, dollar pares gains
NEW YORK, Jan 17 (Reuters) - Wall Street
stocks closed lower, the dollar pared gains and bond prices rose as oil surged
nearly 4 percent on Tuesday amid growing concerns about future supplies from
Iran and Nigeria.
Profit-taking knocked gold off a 25-year peak after it spiked to its highest
price since January 1981.
February crude oil (CLG6: Quote, Profile, Research) settled $2.39 higher, or
3.7 percent, at $66.31 a barrel on the New York Mercantile Exchange within
sight of its $70.85 record of Aug. 30.
The outlook for stocks on Wednesday darkened after disappointing results from
technology bellwethers Intel and Yahoo.
The Dow Jones industrial average fell 63.55 points, or 0.58 percent, to
10,896.32. The Standard & Poor's 500 Index declined 4.68 points, or 0.36
percent, to 1,282.93. The technology-laced Nasdaq Composite Index was down
14.35 points, or 0.62 percent, at 2,302.69.
The surge in oil prices followed an escalation of violence in Nigeria's oil
fields and worries that Iran could withhold crude to ward off Western nations'
threats of United Nations sanctions if Iran resumes its uranium enrichment
program.
Oil is "within striking distance of a new high and it seems to be more
sticky. It's not a one-day deal," said Jim Paulsen, chief investment
officer at Wells Capital Management. "It's taking on bigger significance
and brings back fear about how much the economy could slow."
Chipmaker Intel Corp. (INTC.O: Quote, Profile, Research) fell in
extended-hours trading on Tuesday after reporting quarterly results that
missed Wall Street estimates.
Shares of Internet media company Yahoo Inc. (YHOO.O: Quote, Profile, Research)
also fell late on Tuesday after it reported earnings that came in short of
Wall Street expectations.
But shares of International Business Machines Corp. (IBM.N: Quote, Profile,
Research) inched up after the world's largest computer company reported
earnings that beat expectations, although quarterly revenue was below
analysts' estimates.
"You can call this the good, the bad and the ugly," said Steve
Neimeth, portfolio manager for AIG SunAmerica Asset Management in Jersey City,
New Jersey.
"IBM's numbers looked very good. Intel's the ugly one because the worry
is many investors are expecting higher corporate spending to offset potential
weakness in consumer spending," Neimeth said.
The heaviest drag on the Dow on Tuesday was American International Group Inc.
(AIG.N: Quote, Profile, Research) , the largest U.S. insurance company. Its
stock declined 1.4 percent at $69.04 on the New York Stock Exchange, its worst
one-day drop since September.
Guidant Corp. (GDT.N: Quote, Profile, Research) jumped 7.6 percent to $76.22
after Boston Scientific Corp. (BSX.N: Quote, Profile, Research) raised its
takeover offer for the medical devices company to $80 per share. Earlier, the
stock rose to a record of $76.55.
Shares of Boston Scientific, which is locked in a bidding war for Guidant with
Johnson & Johnson (JNJ.N: Quote, Profile, Research) , fell 5.2 percent to
$23.90.
DOLLAR PARES GAINS
The euro slipped 0.1 percent from late Monday to $1.2105 , after earlier
slipping as low as $1.2052. It has remained in a narrow range of around
$1.2000 to $1.2180 for the past two weeks.
The dollar was up around 0.5 percent to 115.41 yen after going as high as
115.92 yen but failed to hurdle the 116-yen level.
"Higher crude prices put the focus on slower growth and a crimp on
consumer spending," said Shaun Osborne, chief currency strategist at
Scotia Capital in Toronto. "That's not good for the dollar."
Higher oil prices act as a brake on economic growth by cutting consumer
spending on goods and services other than gas and heating fuels.
The dollar had earlier climbed after a report showed U.S. industrial capacity
use at its highest rate in five years, bolstering the case for further Federal
Reserve interest rate increases.
GOLD FALLS FROM 25 YEAR PEAK
At the New York Mercantile Exchange's COMEX division, February delivery gold
(GCG6: Quote, Profile, Research) fell $2.70, or 0.5 percent, to end at $554.30
an ounce. The day's high at $565.50, touched in ACCESS electronic trading, was
the priciest for futures since January 1981.
Gold is often bought as a hedge against inflation and for future sale when
holders need cash in times of trouble.
"The background noise of geopolitical tensions, rising oil prices and
investor diversification will continue to provide good support in coming
sessions," James Moore, an analyst at TheBullionDesk.com, said in a
report.
"We're in a different mindset now, where gold is seen as a fireball asset
and the funds are switching money into it," said Peter Hillyard, head of
metals sales at ANZ Investment Bank.
Hillyard said the market consensus was that gold could move as high as $575 or
$600, and possibly within the month.
BONDS PRICES CLOSE HIGHER
U.S. Treasury debt prices rose on Tuesday, taking benchmark yields to their
lowest in more than three months as the spike in oil prices offset pockets of
strength in two manufacturing reports.
The benchmark 10-year notes (US10YT=RR: Quote, Profile, Research) rose 4/32
for a yield of 4.34 percent, the lowest since early October and down from 4.36
percent.
Two-year notes (US2YT=RR: Quote, Profile, Research) were flat for a yield of
4.34 percent, meaning the yield curve was flat after briefly inverting.
Five-year notes (US5YT=RR: Quote, Profile, Research) rose 2/32 for a yield of
4.28 percent, while the 30-year bond (US30YT=RR: Quote, Profile, Research)
rose 9/32 in price to yield 4.52 percent.
The New York Federal Reserve's Empire State survey of the state's factories,
showed a decline in activity during January. But other components revealed
signs of improvement in the regional labor market.
A separate report from the Federal Reserve in Washington showed national
industrial production grew 0.6 percent in December, above forecasts of a 0.5
percent increase. November's number was also revised a bit higher.
NIKKEI POSTS BIGGEST LOSS IN MONTHS
The Nikkei share average posted its biggest percentage loss in nine months on
Tuesday, falling 2.84 percent on sharp selling of small-cap stocks after news
portal operator Livedoor Co. (4753.T: Quote, Profile, Research) was being
investigated.
The Nikkei ended down 462.08 points at 15,805.95, breaking below 16,000 for
the first time since December 2005.
European shares fell to two-week lows Tuesday after the rise in oil prices and
new profit worries in the telecoms sector.
The FTSEurofirst 300 index of Europe's leading shares closed 0.7 percent lower
at 1,297.44 points, its lowest level since January 5. (Reporting by Jennifer
Coogan, Pedro Nicolaci da Costa, Nick Olivari; Zach Howard, Gene Ramos, and
Genevieve Butler in Paris and Eriko Amaha in Tokyo)
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