Markets Sell Off Even as Oil Plummets
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The blue chips sustained triple-digit losses as concerns over Japan's nuclear crisis and disappointing sales results from Alcoa weighed on stocks. Meanwhile, oil prices have tumbled 5.8% in the last two days.
According to preliminary calculations, the Dow Jones Industrial Average fell 109.7 points, or 0.89%, to 12,271, the S&P 500 was lower by 9.9 points, or 0.75%, to 1,315 and the Nasdaq Composite was off 26.5 points, or 0.96%, to 2,745. The FOX 50 slid 4.6 points to 927.
Alcoa (NYSE:AA) kicked off earnings season Monday, reporting profits that met analysts' expectations, but revenue figures narrowly missing forecasts. Shares of the Dow component fell more than 6% as a result.
Energy issues like ConocoPhillips (NYSE:COP) and Chevron (NYSE:CHX) performed the worst on the day. Transportation shares such as Delta Air Lines (NYSE:DAL) and Union Pacific (NYSE:UNP) managed to buck the downward trend and gain.
Crude prices have slid $6.54 in the past to days after hitting the highest levels since September 2008 last week. Goldman Sachs issued a note to clients suggesting they close long positions in the co-called "CCCP Basket," which includes crude oil, copper, platinum and other commodities.
The situation in the Middle East and North Africa remains volatile, but has stabilized to some extent in recent days, reducing the risk of a major supply disruption. In addition, the International Energy Agency said in its monthly report that preliminary data suggest “high prices are already starting to dent demand growth.”
However, analysts are mixed as to whether this represents a short-term downturn for oil, or is a broader trend.
The recent pullback "isn’t a supply and demand issue," said Darin Newsom, senior commodities analyst at DTN, noting energy demand generally picks up markedly over the summer. "I’m not ready to say the high is in the market."
Light, sweet crude dropped $3.67, or 3.34%, to $106.25 . Gold was off $14.00, or 0.96%, to $1,454.
Prices at the pump, however, continue creeping higher. A gallon of regular gas cost $3.79 on average nationwide, up from $3.56 last month and $2.86 last year.
Saudi Arabia -- the world's biggest oil producer -- could be cutting oil production 500,000 barrels from its increase in March to offset lacking supplies from Libya, according to a report by Reuters.
Fresh data suggesting more radiation is seeping out of Japan's stricken Fukushima Daiichi nuclear plant prompted Japan to increase the severity of its nuclear crisis from level 5 to level 7. The situation in Japan is now on par with the Chernobyl disaster -- which is widely considered to be the worst nuclear disaster in history.
Despite hiking the severity level, the Japanese government said the situation is slowly stabilizing.
"The situation at the Fukushima Daiichi plant is slowly stabilizing, step by step, and the emission of radioactive substances is on a declining trend," said Naoto Kan, Japan's prime minister, at a press briefing.
The International Monetary Fund cut Japan's economic growth forecast 0.2 percentage points from pre-earthquake levels to 1.4%, fueling concerns about the world's third largest economy's ability to rebound.
The U.S. trade deficit narrowed for the first time in three months from $46.97 billion in January to $45.76 billion in February, according to the Commerce Department. Wall Street expected the country to have ran a $44.5 billion deficit for the month.
The trade balance figure lags behind two months, so the market impact of the report is often muted. However, the difference between the value of exports and imports is an important component in calculating economic growth.
Import prices jumped 2.7% in March -- the biggest one-month increase since June 2009, according to a report by the Labor Department. Oil and food prices both increased markedly on the month, with food making the biggest jump since 1994.
Some economists worry elevated energy prices will begin seeping into broader prices, potentially causing long-term inflation.
"The recent trend in import prices provides a clear indication that pipeline price pressures are building," wrote Peter Newland, an economist at Barclays Capital, in a research note. "We expect headline and core inflation measures to pick up further in the coming months."
The dollar edged 0.31% lower against a basket of world currencies, and the euro increased 0.38% against the greenback.
Novartis' (NYSE:NVS) cancer drug, Afinitor, showed safety and efficacy in treating a rare form of pancreatic cancer, a U.S. advisory panel said Tuesday.
Chipotle Mexican Grill (NYSE:CMG) plans on opening ShopHouse -- its first foray into Asian food -- this summer.
Sprint Nextel (NYSE:S) launched a new application to provide music service to devices that run Google's (NASDAQ:GOOG) Android operating system.
Cisco (NASDAQ:CSCO) is overhauling its consumer products division, cutting 550 jobs and shuttering its Flip camera business.
PPL (NYSE:PPL) is issuing shares to repay a loan it took to finance its recent $5.6 billion acquisition of E.On's U.K. power networks.
Citigroup (NYSE:C) plans on selling 12 million shares of its Primerica (NYSE:PRI) common stock in a public offering. Separately, an arbitration panel ordered the bank to pay $51.1 million to investors that incurred losses in a municipal arbitrage fund that lost 80% between 2007 and 2008.
KKR (NYSE:KKR), the private equity firm, was added to Goldman Sachs' conviction buy list, replacing Blackstone Group (NYSE:BX), another private equity player.
Asian shares tumbled amid concerns about the situation in Japan. The Japanese Nikkei 225 was down 1.7% to 9,555 and the Chinese Hang Seng fell 1.3% to 23,976.
European shares were under pressure as well. The English FTSE 100 was down 1.5% to 5,964, the French CAC 40 was lower by 1.5% to 3,978 and the German DAX fell 1.4% to 7,103.