Stocks Hurt by Oil Price, Consumer Spending Data

Stocks fell Tuesday as oil prices surged to a new record above $44 per barrel and worried investors digested a report showing consumer spending in June took its biggest plunge in almost 3 years.

The Dow Jones industrial average (searchfell 58.92 points, or 0.58 percent, to 10,120.24. The Standard & Poor's 500 Inde (search)x lost 6.93 points, or 0.63 percent, to 1,099.69. The technology-laced Nasdaq Composite Index (searchdropped 32.67 points, or 1.73 percent, to 1,859.42.

U.S. crude oil futures hit a new 21-year high of $44.24 in overnight trade before easing slightly during the regular session. On the New York Mercantile Exchange (search), crude oil for September delivery settled on Tuesday at $44.15 a barrel, up 33 cents.

Stocks have been trading in a narrow range in recent weeks as investors worried about the impact of higher interest rates as well as rising oil prices, both of which could dampen the consumer activity that makes up about two-thirds of the U.S. economy. Concerns about the war in Iraq have also undercut investor confidence.

"It is built into the price of everything," said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. "As a result, it could raise the cost of products, which is inflationary, and cut into earnings, he said. "It's that basic ... that far-reaching."

Investors also got weak quarterly results from phone company Qwest Communications International Inc. (Q) and hospital operator Tenet Healthcare Corp. (THC), which both posted wider losses.

"The high price of oil is a factor affecting the consumer spending but I think a lot of traders feel this is a temporary aberration," said Michael Metz, chief investment strategist at Oppenheimer & Co. "It's not good news, but it's not new bad news."

Also weighing on the market was a government report that showed U.S. consumer spending in June took its biggest plunge since September 2001 as shoppers cut back on purchases of expensive items like autos amid slowing income growth.

Personal spending dropped 0.7 percent, while Wall Street economists had forecast a 0.1 percent drop. Incomes rose a tepid 0.2 percent, a slowdown from May's 0.6 percent gain, the Commerce Department (search) report showed.

In company news, shares of Qwest fell 80 cents, or 20.1 percent, to $3.17 after it reported a larger-than-expected quarterly loss after charges for job cuts and boosting reserves for legal settlements.

Meanwhile Tenet, which is the target of civil and criminal investigations, said its quarterly loss more than doubled, hurt by unpaid patient bills and special charges. Tenet also said it had received a subpoena regarding its hospitals in New Orleans and that its chief financial officer intends to leave the company. It fell 37 cents, or 3.3 percent, to $10.81.

On the upside, Tyco International Ltd. (TYC) gained after it posted a 63 percent increase in quarterly profit on strength in its electronics and engineering businesses, and said it is exploring ways to return cash to shareholders. It rose 17 cents to $31.41.

ConocoPhillips' (COP) stock rose 12 cents to $79.03, slipping from an earlier high of $79.93. Shares of ChevronTexaco (CVX) jumped $2.18, or 2.3 percent, to $98.66, after earlier hitting a 52-week high at $98.80. Exxon Mobil (XOM) gained 64 cents, or 1.4 percent, to $46.89, just below its fresh 52-week high of $46.94 hit earlier during the session.

The S&P oil and gas producers index rose to 263.43 Tuesday, just below the new all-time high of 263.77 touched earlier in the session.

Technology shares figured prominently among the Dow's decliners, with International Business Machines Corp. (IBM)  falling 98 cents to $85.71 and Intel Corp. (INTC) falling 73 cents to $24.17. The Dow's biggest decliner was Caterpillar Inc. (CAT), down $1.42 at $71.68.

Shares in Martha Stewart Living Omnimedia Inc. (MSO) fell 15 cents to $11.25 after the company — still struggling with the personal legal woes of its founder and former chairman — posted a wider loss than Wall Street expected in the second quarter. It also warned of bigger-than-expected losses in the third quarter. Martha Stewart Living posted a loss of $19.29 million, or 39 cents per share, in the three months ended June 30 in contrast to a profit of $931,000, or 2 cents per share, a year earlier.

Trading was moderate, with 1.34 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.49 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.

Decliners outnumbered advancers on the NYSE by 6-to-5, and about 2-to-1 on Nasdaq.

The Russell 2000 index of smaller companies fell 8.30, or 1.5 percent, to 543.63.

Overseas, Japan's Nikkei stock average dropped 0.7 percent, Britain's FTSE 100 rose 0.3 percent, France's CAC-40 rose 0.8 percent, and Germany's DAX index rose 0.4 percent.

Reuters and the Associated Press contributed to this report.