By Donna Kardos Yesalavich
A retreat in energy stocks led to the rally in the broader U.S.
market stalling Friday, as it appeared Wall Street would be stymied
in its attempt to set the longest winning streak in more than 13
years.
The energy sector was the weakest category in a broad-based
selloff as oil prices retreated near $80 a barrel. Worries about
key overseas economies also weighed on the market, which many said
was overdue for a pause after a solid run lately.
The Dow Jones Industrial Average (DJI) recently traded 77 points
lower, off 0.7%, at 10,702, on pace to snap an eight-day winning
streak. The run higher is the longest for the Dow since late
August, while a nine-day gain, if the Dow could somehow manage a
late-day rebound, would represent the blue chips' longest rally
since November 1996.
Lower energy prices fueled by an uptick in the dollar has made
that rosy outcome seem less and less likely as the session has
played out. Oil futures were recently off $2.07 at $80.13 a barrel,
after retreating near $79 a barrel earlier in the New York
Mercantile Exchange session.
The S&P 500 (SPX) was recently off 0.7%, led by a 1.3%
decline in its energy sector. Baker Hughes (BHI) slid nearly 4%,
whole Consol Energy (CNX) and Massey Energy (MEE) were off about 2%
each. Dow components Exxon Mobil (XOM) and Chevron (CVX) were down
about 1% each.
"The commodities, like other risky assets, are taking a little
bit of a breather," said Russ Koesterich, managing director of
BlackRock's scientific active equity business. But he said it was
encouraging that both stocks and raw materials were not declining
even more.
"The market has had a big run-up, it's continuing to defy some
of the pessimists and this happened on a bunch of factors: earnings
coming in better than expected, economic data more or less in the
sweet spot of the continuing recovery, and news this week that
inflation is not a threat," Koesterich said, referring to a drop in
producer prices, flat consumer prices, and the Federal Reserve's
vow to keep U.S. interest rates near zero. "This is helping to keep
a floor under stocks."
The U.S. Dollar Index (DXY) rose about 0.6%, helped by
safe-haven bets due to confusion over possible financial aid for
Greece. The market was also surprised by the Reserve Bank of
India's increase in its key lending rate to 5% and in its borrowing
rate to 3.5%.
"People are worried we might see the same thing out of China
when we come in Monday morning," said Nick Kalivas, vice president
of MF Global. "The fact that [India's central bank] did it and when
they did it is creating some worries we could see some concerted
rate hikes."
Indexes tracking higher-risk corners of the stock market fared
worse than the Dow and S&P. The Nasdaq Composite Index (RIXF)
was off 0.9%, while the Russell 2000 fell 1.4%.
Among stocks in the spotlight, blue chip Boeing (BA) rose 0.9%
after announcing plans to increase production of its 777 and 747
aircraft earlier than anticipated amid increasing demand.
Trading sharply lower, shares of Palm (PALM) plunged 25%. The
company reported a narrower quarterly loss but warned of
significantly lower revenue in the current quarter amid
disappointing sales of its latest smartphones.
Merck (MRK) slipped 1.1% after the Food and Drug Administration
warned about the increased risk of muscle injury for patients
taking an 80-milligram dose of its cholesterol drug Zocor.
Trading volume was higher, with about 3.2 billion shares having
changed hands in New York Stock Exchange Composite volume recently,
compared with the recent daily average of about 4.8 billion. The
increase came on so-called quadruple witching day, when contracts
for stock-index futures, stock-index options, stock options and
single-stock futures expire. Quadruple witching tends to increase
volume and volatility.
Treasurys were mixed, with the two-year note (UST2YR) down 1/32
to yield 0.973% and the 10-year note (UST10Y) up 4/32 to yield
3.663%.