Stocks finished lower Wednesday as crude oil rose to $61.28 per barrel, an all-time high for the New York Mercantile Exchange, and traders worried that rising energy costs could slow economic growth. Strength in semiconductors and biotech stocks limited the downside to the Nasdaq, while all of the components of the Dow Jones industrial average fell except for IBM (IBM) and Hewlett-Packard (HPQ).
The Dow Jones industrial average fell 101.12 points, or 0.97%, to 10,270.68. The broader Standard & Poor's 500 index fell by 10.05 points, or 0.83%, to 1,194.94. The tech-heavy Nasdaq composite was down 10.10 points, or 0.49%, to 2,068.65.
Crude oil settled up $1.71 to $61.30 per barrel, as traders worried that tropical storms Cindy and Dennis could disrupt production in the Gulf of Mexico. Some dealers are worried the market is about to burst at these high altitudes, reports Standard & Poor's MarketScope. Thursday's weekly inventory reports, delayed because of the July 4 holiday, could set the near term course for the energy market.
The energy price spike overshadowed some good news on the services sector. The Institute for Supply Management's non-manufacturing survey jumped to 62.2 in June, above the median expectation of 58.5, and up from May's number of 58.5.
Meanwhile, U.S. Challenger planned layoffs surged to 110,996 in June, the highest reported level since January 2004. It is an increase from 82,300 in May. This data is offset by recently low jobless claims and the strong ISM data, and should not have too much effect on the bond market, says Action Economics.
The Mortgage Bankers Association reported that applications for home mortgages rose sharply for the first time in three weeks, up 9.6% to 853.4. The jump up did not correspond to interest rates, says Action Economics, showing that mortgages are remaining fairly insensitive to week-by-week gyrations in rates.
The week's most closely watched economic release will be the employment report for June, due out on Friday. Economists are expecting June's non-farm payrolls to rise by about 190,000, after growing by a disappointing 78,000 in May, according to Action Economics. Also up ahead, weekly initial jobless claims will be released on Thursday.
Shares of Pacificare Health Systems (PHS) shot up after the Wall Street Journal reported that UnitedHealth Group (UNH) is in advanced talks with the PacifiCare about a possible acquisition. Standard & Poor's reiterated a hold rating on UnitedHealth, and kept a strong buy on PacifiCare.
Par Pharmaceuticals (PRX) reported today that the FDA has approved Megace ES, a drug designed to treat anorexia, cachexia, and unexplained weight loss in patients with AIDS.
In M&A news, Amegy Bancorporation (ABNK) agreed to be acquired by Zions Bancorporation (ZION) in a $1.7 billion cash and stock deal.
According to a report in the Financial Times, Maytag (MYG) may be ending takeover talks with a group including the Chinese appliance maker Haier, following pressure from a second grouop of bidders.
Earnings season kicks off on Thursday, with companies such as aluminium producer Alcoa (AA) and consultant Accenture (ACN) scheduled to report the latest quarterly results.
Treasury yields slipped lower as prices recovered from Tuesday's losses, although the ISM data pushed yields up slightly from session lows. The benchmark ten-year note traded at 4.07%. The bond market remains "in hibernation" ahead of the payroll numbers, says Action Economics.
European stock markets finished higher Wednesday. London's FTSE 100 index gained 39.50 points, or 0.76%, to 5,229.600. Traders were encouraged by Tuesday's rally in the U.S. and as U.K. May industrial production fell less than expected. There was little market reaction to London's winning bid for the 2012 Olympics.
In Germany, the DAX index was up 11.84 points, or 0.26%, to 4,615.49. Bayerische Motoren Werke was higher on improved June sales. Meanwhile, shares of Commerzbank rose on news that it is considering teaming with investors George Soros and John Flowers to acquire BHW Holding AG and its mortgage bank business.
In Paris, the CAC 40 index gained 27.20 points, or 0.64%, moving to 4,279.95. Air France was higher after in announced it would partner with China Southern Airlines to share costs and coordinate flights between France and China. Alcatel shares also traded higher after Romania's Romtelecom chose the company to provide a network upgrade.
Asian markets finished mixed Wednesday. In Japan, the Nikkei index lost 13.17 points, or 0.11%, to 11,603.53. Exporters including Toyota Motor and Nissan Motor rose as the dollar continued to gain strength. Meanwhile, profit-taking hurt the construction and banking sectors. Volume was average.
In Hong Kong, the Hang Seng index fell 25.13 points, or 0.18%, to 14,149.93, as CNOOC led the index up as it extended gains following its bid for American oil company Unocal.