Stocks Sink on Weak Data, Spike in Oil Prices
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Wall Street skidded lower today after a weaker-than-expected reading on the manufacturing sector and a spike in oil prices to $100 a barrel triggered concerns of a further slowdown in the overall economy.
The major indexes each lost more than 1%, with the Dow Jones industrials giving up more than 200 points. It was the blue chip index’s biggest point decline for the first day of trading in a new year.
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The Institute for Supply Management’s report that its manufacturing index fell to 47.7% for December from 50.8% in November raised concerns that the economy could be slowing at a quicker pace than some investors had estimated. The reading below 50 signals economic contraction, whereas readings over 50 indicate expansion.
Analysts polled by Thomson/IFR had anticipated that manufacturing would expand modestly in December.
Light, sweet crude rose $3.64 to $99.62 a barrel on the New York Mercantile Exchange after earlier hitting $100 for the first time. The rise follows violence in the oil-producing nation of Nigeria, concerns about weather-related production halts in Mexico and speculation that inventory figures will show drops in levels of American supplies.
The economic reading and rising oil prices were unwelcome for investors wading into the first trading session of 2008 and indicated the concerns that weighed on stocks in the second half of 2007 will for now persist.
“It certainly is a soft number and the declines in production and new orders are eye-catching,” a chief economist at T. Rowe Price Associates Inc., Alan Levenson, said. “Overall, the ISM has generally been a decent guide for the economy. This is a sharp decline in one month.”
Stocks failed to gain momentum after an initial bounce after minutes from the Federal Reserve’s last meeting. Central bankers, who voted to raise interest rates a quarter percentage point, called the economic outlook “unusually uncertain.” While that strengthened the case for lower rates, it also confirmed some of the market’s worst fears about the economy.
According to preliminary calculations, the Dow Jones industrial average fell 219.80, or 1.66%, to 13,043.57. The blue chips briefly fell below 13,000 for the first time since November.
Broader stock indicators also fell sharply. The Standard & Poor’s 500 index slid 21.09, or 1.44%, to 1,447.27, and the Nasdaq composite index fell 42.65, or 1.61%, to 2,609.63.
