Business

Stocks sink in sea of bad news

A barrage of bad news – including a record high for oil – sent Wall Street plunging Thursday, dropping the Dow Jones industrials nearly 360 points to the lowest level in nearly two years.

Oil's surge past $140 a barrel was just one of the day's worrisome developments. Warnings about the key financial, automotive and high-tech industries added up to an increasingly troubled economy.

The Dow closed at its low of the day, down 358.41, or 3.03 percent, to 11,453.42, its lowest finish since Sept. 11, 2006, while all the major indexes lost around 3 percent. The flight from stocks sent investors rushing for the safety of the Treasury market, where prices rose and yields tumbled.

Thursday's confluence of bad news overshadowed the National Association of Realtors' report that existing home sales edged up last month, only the second increase in the past 10 months. It also wiped out any positive impact from the Federal Reserve's widely expected decision Wednesday to leave interest rates unchanged.

Analysts' negative comments on General Motors drove shares of the largest U.S. automaker to their lowest level in more than 30 years, while Citigroup fell sharply after an analyst placed a “sell” rating on the stock and warned investors to expect less from the brokerage sector in an uneasy economic climate.

Disappointing outlooks from technology bellwethers Oracle and BlackBerry maker Research In Motion further soured investors' moods and made the tech sector one of the steepest decliners.

The gloom was compounded by an unnerving forecast about oil prices that raised the specter of higher inflation and more damage to the economy.

OPEC President Chakib Khelil was quoted as telling a French television station that oil could rise to between $150 and $170 per barrel this summer before pulling back later in the year. That and a falling dollar helped send light, sweet crude as high as $140.39 and to a record settlement of $139.64 on the New York Mercantile Exchange.

Rising oil has saddled nearly all parts of the economy with higher costs, weighing on consumers who now have to reach much deeper into their wallets at the gas pump and therefore have less to spend elsewhere.

The stream of downbeat assessments drove home to investors how much U.S. companies stand to be hurt from the fallout of the prolonged housing slump, the nearly year-old credit crisis and the soaring price of oil.

The great fear has been that rising prices and worries about their finances will force consumers to further curb their spending, sending the economy into even more of a decline.

The latest reading on the gross domestic product Thursday backed up that fear.

The Commerce Department said the economy as measured by GDP rose at a 1 percent annual rate in the first quarter, a slight improvement from the previous estimate of 0.9 percent, but still anemic. Moreover, the number does not reflect the impact of higher gas and oil prices that shot up further during the second quarter, which ends Monday.

“This is unfortunately kind of a slack period. We're waiting for second-quarter earnings. Until then, we have this very negative attitude among investors and everyone seems to be latching onto negative news and shrugging off the positive news,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, pointing to the uptick in housing sales.

Alexander Paris, economist and market analyst for Chicago-based Barrington Research, said the market's drop appeared technical in nature.

Goldman Sachs' downgrades might have triggered the selling, Paris said, but it was aggravated by end-of-the-quarter window dressing, in which institutions' trades are designed to put their portfolios in the best light.

Meanwhile, he added, “second quarter estimates are still declining. There might be some nervousness about the earnings season coming up.”

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