NEW YORK – Stocks nosedived and the Dow barely closed over 10,000 Wednesday as oil prices resumed their climb and a steep decline in commodity prices dented metals stocks, offsetting strong reports from McDonald's, Intel and Yahoo.
The Dow Jones industrial average (search) ended down 74.85 points, or 0.74 percent, at 10,002.33 and the Standard & Poor's 500 Index (search) closed down 8.19 points, or 0.73 percent, at 1,113.65. The Nasdaq Composite Index (search) lost 4.64 points, or 0.24 percent, at 1,920.53.
Crude oil futures opened lower, a day after trading above $54 per barrel, raising hopes for a better economic picture by year's end. But as oil traders became less bullish about U.S. inventories and worries grew about Hurricane Ivan's lingering impact on production in the Gulf of Mexico, prices began to soar. Light, sweet crude for November delivery surged $1.13 to $53.64 per barrel on the New York Mercantile Exchange (search).
Even as oil rallied, however, commodity-dependent stocks foundered, pressuring blue chips. On the Dow, Alcoa Inc. (AA) , the world's largest aluminum producer, lost $1.12 to $32.07, and Exxon Mobil Corp. (XOM) was down 96 cents at $48.41. Other energy stocks also suffered: Chevron Texaco (CVX) shed $1.08 to $53.39 and Occidental Petroleum Corp. (OXY) lost $2.26 to $54.69.
The weakness in the equity market surprised some analysts, after a declines in crude prices Tuesday and a sharply higher open for stocks. Anticipation of Thursday's report on weekly jobless claims was also spooking buyers — particularly following disappointing employment data for September. That, combined with worries about decelerating earnings, contributed to an apprehensive climate on Wall Street.
"There is so much uncertainty in the market right now, and it is playing itself out as fear: The fear of being overcommitted to stocks," said Ken Tower, chief market strategist for Schwab's CyberTrader. "We've also seen a lot of recent sentiment data that suggests there is a real short-term consensus opinion that the market headed lower. So there's tremendous uncertainty, and uncertainty and anxiety are the enemies of a bull market."
Analysts said the market's gyrations were related to growing fears about a possible bubble in commodities prices, and worries that they would due for a correction soon in the face of slowing global demand, particularly in China, and cooling economic growth at home. With oil prices up 60 percent so far this year, the thinking went, how much further can they go?
"There is a sense here that we've gone too far, too fast in the commodity stocks ... and that spills over into the big industrials," said Larry Wachtel, market analyst with Wachovia Securities. "All the commodity stocks are getting whacked ... steel, copper, aluminum, oil, chemicals, paper products, you name it. And that's being reflected in the market."
The rise in oil prices definitely overshadowed the session's earnings news. Even though third-quarter results have been fairly positive so far, analysts are dubious about whether that will be enough to lift stocks in the face of lofty energy prices.
Intel (INTC) surged 72 cents to $21 after beating Wall Street forecasts by 3 cents per share, although analysts' estimates were reduced after a disappointing mid-quarter update from the semiconductor maker. Other chip stocks also gained, with Advanced Micro Devices Inc. (AMD) climbing 16 cents to $13.86 and National Semiconductor Corp. (NSM) rising 53 cents to $15.76.
McDonald's (MCD) was up $1.24 at $28.79 after it projected earnings of 61 cents per share in the third quarter, crediting a stronger tax situation and better worldwide sales for its upgraded outlook. Analysts had been expecting earnings of 49 cents per share.
Yahoo! (YHOO ) gained 88 cents to $35.11 after quadrupling its profits from a year ago. The company's earnings of 9 cents per share was in line with Wall Street expectations.
Dutch chip equipment maker ASML (ASML) added to the good news coming from the tech sector. The company posted lower than expected third-quarter earnings Wednesday but said its order book had risen. ASML shares rose 12 cents, or 1 percent, to $12.94.
Investors will keep an eye on news from Merck & Co.'s (MRK) head of research and a top company lawyer who will hold a briefing about the drugmaker's decision late last month to withdraw its arthritis drug, Vioxx.
In other corporate earnings news, Accenture Ltd. (ACN) fell 11 percent, or $3.08, to $23.51 after the consulting firm posted a higher quarterly profit, but forecast earnings for the current quarter slightly below analysts' estimates.
Host Marriott's shares fell 23 cents to $14.71 and Harley-Davidson dropped 2.3 percent, or $1.37, to $58.39.
The Russell 2000 index of smaller companies was down 7.29, or 1.26 percent, at 569.42.
Overseas, Japan's Nikkei stock average fell 0.1 percent. In Europe, Britain's FTSE 100 declined 0.28 percent, France's CAC-40 added 0.15 and Germany's DAX index was up 0.24 in late-day trading.
Reuters and the Associated Press contributed to this report.