Stocks Plunge as Oil Nears $100 a Barrel and Gold Hits Record High
The first trading day of the month is usually good to equities, but after a two-day respite, stocks went back back to suffering broad-based declines. The blue-chip Dow ($INDU) lost 168 points, or 1.4%, to close at 12,058. The broader S&P 500 ($INX) dropped 21 points, or 1.6%, to finish at 1,306. The tech-heavy Nasdaq Composite ($COMPX) fell 45 points, or 1.6%, to close at 2,737.
Federal Reserve Chairman Ben Bernanke in a semi-annual report to Congress warned that sustained high oil prices could dent the recovery -- but that was hardly news to traders who were already discounting such risks. The Dow, after all, lost 2.1% last week. If there was any pattern to Tuesday's action it was that oil prices resumed their upward trend after stabilizing over the prior two sessions -- and that, in turn, spooked equity investors.
Benchmark crude oil futures traded on the Comex division of the New York Mercantile Exchange (CME) rose $2.66, or 2.7%, to settle at $99.63 a barrel -- their highest closing level since September 2008.
Not All News Was Bad
In addition to fueling higher oil prices, turmoil in Libya has added to geopolitical uncertainty, which has led to a rebound in gold prices. Gold traded on the Comex rose $21.30, or 1.5%, to settle at $1,431 an ounce -- a new record when not adjusted for inflation.
Rival Ford Motor (F) reported Tuesday that its February sales rose 14% compared to a year ago, in part due to strong sales of the revamped Ford Explorer sports-utility vehicle, which debuted in late 2010. In all, auto sales in February ran at the strongest annual pace since the federal "cash-for-clunkers" program.
In economic news, activity at U.S. manufacturers expanded last month at its fastest pace in seven years. The Institute for Supply Management said its manufacturing index rose to 61.4 from 60.8 the prior month. The gauge easily beat economists' average outlook, which stood at 60.5 for February. Alas, autos and manufacturers could stop the bleeding among stocks inflicted by oil.