NEW YORK – Stocks fell Monday, with the Dow industrials closing below 10,000 for the first time since Aug. 17, as crude oil prices set a new trading record and fueled investors' concerns that energy costs will squeeze economic growth.
The Dow Jones industrial average (search) closed down 58.70 points, or 0.58 percent, at 9,988.54. The S&P 500 index (search) ended down 6.59 points, or 0.59 percent, at 1,103.52. The technology-heavy Nasdaq Composite Index (search) was down 19.60 points, or 1.04 percent, at 1,859.88.
U.S. light crude settled at its highest level in 21 years of trading on the New York Mercantile Exchange (search) as concerns over instability in Nigeria, OPEC's fifth largest producer, added to supply uncertainties from major producers Russia, Saudi Arabia and Iraq.
NYMEX crude for November delivery settled at $49.64 a barrel, up 76 cents, or 1.6 percent. Earlier, the contract hit an all-time intraday record of $49.75.
"There is one thing moving the market down and that's higher oil prices," said Tom Schrader, managing director, U.S. equity trading, at Legg Mason Wood Walker in Baltimore.
Oil producers and refiners still struggled to recover from Hurricane Ivan's damage in the Gulf of Mexico, and global demand continues to tighten, analysts said, making the markets susceptible to even minimal losses in overall production. And investors are worried that if prices rise at the gas pump, consumer spending might be pared back just as retailers prepare for the holiday shopping season.
However, given the relatively small drop in share prices Monday, investors may be accepting the fact that oil prices are in the $40 to $50 range, said Brian Pears, head equity trader at Victory Capital Management in Cleveland.
"Obviously, the closer to $40 we are, the better off we'll be," Pears said. "As you reach $50, you get the risk of speculation. But the inflation data over the past few months has been muted, and it doesn't look like oil is going to have a big impact on the economy, just as long as we can stay at least steady at this price level."
Adding to the grim mood on Wall Street Monday was reports of damage from Hurricane Jeanne (search). As Florida recovers from its fourth hurricane in six weeks, it is increasingly apparent that this year's unprecedented tropical storm season is hurting corporate earnings. Earnings warnings are on the rise this month, and more than a third of them have been pegged to the storms, according to Reuters Estimates.
Meanwhile, the Commerce Department (search) reported that new home sales rose 9.4 percent to 1.184 million units in August, a higher figure than economists had forecast. While overshadowed by the oil situation, the good news showed that consumers were still willing to make big purchases even as the economy has slowed.
Shares of airline companies, including Delta Air Lines Inc. (DAL), fell as investors worried that record oil prices would slam profits at already stumbling carriers. Delta slipped about 10 percent to $2.94.
A JP Morgan analyst cut his ratings on low-cost carriers JetBlue Airways (JBLU), AirTran Airways (AAI) and Frontier Airlines (FRNT), citing rising oil prices, weak demand in Florida and light traffic trends. JetBlue fell 6 percent to $20.56, AirTran slipped 5 percent to $9.73 and Frontier closed down almost 3 percent at $7.35.
A downgrade of the semiconductor sector by brokerage Morgan Stanley hurt chip stocks. Intel Corp. (INTC) shed 21 cents to $19.92 and chip-equipment maker Applied Materials Inc. (AMAT) fell 24 cents to $16.41.
Fannie Mae (FNM) rose 1.5 percent to $66.50 as Standard & Poor's said the embattled U.S. mortgage finance company can generate capital quickly after Fannie Mae reached a deal with regulators to keep more cash on hand.
Tommy Hilfiger Corp. (TOM) was the biggest percentage loser on the New York Stock Exchange after the clothing maker said a federal grand jury subpoenaed documents related to commissions paid to a non-U.S. subsidiary. Tommy Hilfiger shares fell 21 percent to $10.30.
Shares of ESS Technology (ESST), a maker of computer chips for DVD equipment, fell 3 percent, or 23 cents, to $7.02 after the company lowered its third-quarter revenue and earnings outlook.
Wal-Mart Stores Inc. (WMT) was upgraded to "buy" from "neutral" by Banc of America, which said the recent selloff in the company's shares, combined with promising profit potential, made the stock attractive. Wal-Mart fell 29 cents to $52.52.
Walgreen Co. (WAG) rose 22 cents to $36.48 after announcing that its profit rose 18.1 percent in the fourth quarter, beating quarterly estimates by a penny per share, thanks to higher prescription sales.
J.P. Morgan Chase & Co. (JPM) said it would purchase a majority stake in Highbridge Capital Management, a major hedge fund, for about $1 billion. J.P. Morgan Chase slipped 62 cents to $39.13.
Trading was moderate, with about 1.3 billion shares changing hands on the New York Stock Exchange and about 1.3 billion shares traded on Nasdaq. Both were below their daily average last year.
On the NYSE, nearly 2 stocks fell for every one that advanced, while nearly 3 stocks declined for every one that rose on Nasdaq.
The Russell 2000 index of smaller companies was down 7.61, or 1.3 percent, to 558.36.
Overseas, Japan's Nikkei stock average fell 0.3 percent. In Europe, Britain's FTSE 100 closed down 0.8 percent, France's CAC-40 dropped 0.5 percent for the session and Germany's DAX index lost 0.9 percent.
Reuters and the Associated Press contributed to this report.