NEW YORK - Global stocks tumbled on Tuesday as crude oil approached $130 a barrel amid deepening worries over tight global stockpiles and as rising wholesale prices in Europe and the United States stoked inflation fears.
U.S. stock indexes fell more than 1 percent, with the Dow industrials slumping 200 points as slack earnings from leading retailers suggested weakening consumer spending.
The Dow posted its biggest single-day percentage drop since April 11, while European shares posted their worst one-day drop in two months. Energy shares Exxon Mobil and Chevorn were the only two gainers among the 30 components of the Dow, with Chevron hitting a lifetime high.
Oil rose to a record high of $129.60 CLc1 a barrel in New York amid signals from OPEC that no additional supplies are forthcoming and as investment banks and influential U.S. oil investor T. Boone Pickens forecast higher prices. Pickens said he sees oil prices reaching $150 a barrel this year.
"There's a feeling that some of these forecasts of $150 oil might be right," said Peter Beutel, president of Cameron Hanover. "So why not buy it now, rather than later?"
Oil prices have risen sixfold since 2002 amid surging demand in China and other developing economies.
Underlying U.S. producer prices in April posted their biggest annual gain since December 1991. The rise in oil, combined with the producer price reports, suggested that soaring commodities prices would become embedded in corporate costs.
U.S. government bond prices gained as investors bet the economy would crack when companies are forced to settle for slimmer profit margins or to pass on their rising costs to increasingly hard-pressed consumers.
"The big question in the market is how consumer spending holds up in the midst of high energy prices and all of the problems that we're having," said Frank Lesh, futures analyst and broker at FuturePath Trading LLC in Chicago. "New highs again for crude oil add to this fear."
The Dow Jones industrial average .DJI fell 199.48 points, or 1.53 percent, at 12,828.68. The Standard & Poor's 500 Index .SPX fell 13.21 points, or 0.93 percent, at 1,413.42. The Nasdaq Composite Index .IXIC fell 23.83 points, or 0.95 percent, at 2,492.26.
Slack earnings from discount retailer Target Corp (TGT.N: Quote, Profile, Research) and home improvement chain Home Depot Inc (HD.N: Quote, Profile, Research) suggested weakening consumer spending. Shares of Home Depot fell 5.2 percent to $27.37, while shares of Target lost 1.2 percent to $54.29
Shares of banks, including JPMorgan Chase & Co, also dropped after an influential analyst warned that the credit crisis was far from over and could extend beyond next year.
Meredith Whitney, a U.S. banking analyst at Oppenheimer & Co, said the credit crisis is likely to extend well into next year and beyond, resulting in three years of multibillion dollar revenue declines for banks.
JPMorgan shares lost 5.0 percent to $43.70.
Shares of Exxon Mobil (XOM.N: Quote, Profile, Research) gained 0.2 percent to $94.56, and Chevron (CVX.N: Quote, Profile, Research) rose 0.9 percent to $103.09, after earlier hitting a lifetime high of $103.25
In Europe, mining stocks and banks were the biggest decliners. The FTSEurofirst 300 index of top European shares fell 2 percent to close at 1,350.54 points, making it the worst one-day fall since March 17, when the index hit a two-and-a-half-year year low.
Mining stock losses were led by BHP Billiton (BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.L: Quote, Profile, Research), which fell 6.9 and 7.9 percent, respectively. These declines come just days after shares in both companies hit record highs.
Among banks HSBC (HSBA.L: Quote, Profile, Research) lost 2.3 percent, Banco Santander (SAN.MC: Quote, Profile, Research) fell 1.4 percent, BNP Paribas (BNPP.PA: Quote, Profile, Research) fell 1.8 percent and Credit Suisse (CSGN.VX: Quote, Profile, Research) lost 2.5 percent.
U.S. Treasury debt prices rose as the record high oil prices heightened prospects for a slower economy and falling equities pushed investors into safe-haven government bonds.
"If the rise in energy prices is perceived as a negative for the economy, then it can be viewed as a positive for Treasuries," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
U.S. crude oil futures CLc1 settled up $2.02 to $129.07 a barrel after hitting a high of $129.60 during the session. London Brent crude LCOc1 rose $2.78 to $127.84 a barrel.
The dollar fell as talk of higher euro zone interest rates prompted investors to increase exposure to the euro, although losses were capped by inflation data that muddied the U.S. interest rate outlook.
The dollar fell against major currencies, with the U.S. Dollar Index .DXY off 0.85 percent at 72.407.
The euro rose 0.94 percent at $1.5663, and against the yen, the dollar fell 0.67 percent at 103.64.
The benchmark 10-year U.S. Treasury note rose 12/32 to yield 3.7859 percent. The 2-year U.S. Treasury note was up 4/32, with the yield at 2.3232 percent. The 30-year U.S. Treasury bond was up 21/32, with the yield at 4.5373 percent.
Gold surged above $920 an ounce, ending near its highest level in almost a month as record-high oil prices fueled fears of accelerating inflation.
Spot gold hit a high of $923.40 an ounce, its highest level since April 22. It last traded at $920.20/921.40 in New York.
"Obviously the worries about inflation continue and are getting worse," said Daniel Hynes, metals analyst at Merrill Lynch.
Tokyo's Nikkei stock average fared little better, slipping 0.77 percent, or 109.52 points, to finish at 14,160.09.
U.S. stock indexes fell more than 1 percent, with the Dow industrials slumping 200 points as slack earnings from leading retailers suggested weakening consumer spending.
The Dow posted its biggest single-day percentage drop since April 11, while European shares posted their worst one-day drop in two months. Energy shares Exxon Mobil and Chevorn were the only two gainers among the 30 components of the Dow, with Chevron hitting a lifetime high.
Oil rose to a record high of $129.60 CLc1 a barrel in New York amid signals from OPEC that no additional supplies are forthcoming and as investment banks and influential U.S. oil investor T. Boone Pickens forecast higher prices. Pickens said he sees oil prices reaching $150 a barrel this year.
"There's a feeling that some of these forecasts of $150 oil might be right," said Peter Beutel, president of Cameron Hanover. "So why not buy it now, rather than later?"
Oil prices have risen sixfold since 2002 amid surging demand in China and other developing economies.
Underlying U.S. producer prices in April posted their biggest annual gain since December 1991. The rise in oil, combined with the producer price reports, suggested that soaring commodities prices would become embedded in corporate costs.
U.S. government bond prices gained as investors bet the economy would crack when companies are forced to settle for slimmer profit margins or to pass on their rising costs to increasingly hard-pressed consumers.
"The big question in the market is how consumer spending holds up in the midst of high energy prices and all of the problems that we're having," said Frank Lesh, futures analyst and broker at FuturePath Trading LLC in Chicago. "New highs again for crude oil add to this fear."
The Dow Jones industrial average .DJI fell 199.48 points, or 1.53 percent, at 12,828.68. The Standard & Poor's 500 Index .SPX fell 13.21 points, or 0.93 percent, at 1,413.42. The Nasdaq Composite Index .IXIC fell 23.83 points, or 0.95 percent, at 2,492.26.
Slack earnings from discount retailer Target Corp (TGT.N: Quote, Profile, Research) and home improvement chain Home Depot Inc (HD.N: Quote, Profile, Research) suggested weakening consumer spending. Shares of Home Depot fell 5.2 percent to $27.37, while shares of Target lost 1.2 percent to $54.29
Shares of banks, including JPMorgan Chase & Co, also dropped after an influential analyst warned that the credit crisis was far from over and could extend beyond next year.
Meredith Whitney, a U.S. banking analyst at Oppenheimer & Co, said the credit crisis is likely to extend well into next year and beyond, resulting in three years of multibillion dollar revenue declines for banks.
JPMorgan shares lost 5.0 percent to $43.70.
Shares of Exxon Mobil (XOM.N: Quote, Profile, Research) gained 0.2 percent to $94.56, and Chevron (CVX.N: Quote, Profile, Research) rose 0.9 percent to $103.09, after earlier hitting a lifetime high of $103.25
In Europe, mining stocks and banks were the biggest decliners. The FTSEurofirst 300 index of top European shares fell 2 percent to close at 1,350.54 points, making it the worst one-day fall since March 17, when the index hit a two-and-a-half-year year low.
Mining stock losses were led by BHP Billiton (BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.L: Quote, Profile, Research), which fell 6.9 and 7.9 percent, respectively. These declines come just days after shares in both companies hit record highs.
Among banks HSBC (HSBA.L: Quote, Profile, Research) lost 2.3 percent, Banco Santander (SAN.MC: Quote, Profile, Research) fell 1.4 percent, BNP Paribas (BNPP.PA: Quote, Profile, Research) fell 1.8 percent and Credit Suisse (CSGN.VX: Quote, Profile, Research) lost 2.5 percent.
U.S. Treasury debt prices rose as the record high oil prices heightened prospects for a slower economy and falling equities pushed investors into safe-haven government bonds.
"If the rise in energy prices is perceived as a negative for the economy, then it can be viewed as a positive for Treasuries," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
U.S. crude oil futures CLc1 settled up $2.02 to $129.07 a barrel after hitting a high of $129.60 during the session. London Brent crude LCOc1 rose $2.78 to $127.84 a barrel.
The dollar fell as talk of higher euro zone interest rates prompted investors to increase exposure to the euro, although losses were capped by inflation data that muddied the U.S. interest rate outlook.
The dollar fell against major currencies, with the U.S. Dollar Index .DXY off 0.85 percent at 72.407.
The euro
The benchmark 10-year U.S. Treasury note
Gold surged above $920 an ounce, ending near its highest level in almost a month as record-high oil prices fueled fears of accelerating inflation.
Spot gold
"Obviously the worries about inflation continue and are getting worse," said Daniel Hynes, metals analyst at Merrill Lynch.
Tokyo's Nikkei stock average fared little better, slipping 0.77 percent, or 109.52 points, to finish at 14,160.09.
