Stocks Hurt by Oil Worries, Intel, AIG Losses

NEW YORK – Stocks retreated Tuesday as bellwether Intel Corp. and insurance giant AIG's losses dragged on blue chips, offsetting a solid rise in retail sales and better-than-expected quarterly results from Lehman Brothers.

The Dow Jones industrial average (search) was down 59.41 points, or 0.55 percent, at 10,745.10. The Standard & Poor's 500 Index (search) was down 9.08 points, or 0.75 percent, at 1,197.75. The Nasdaq Composite Index (search) was down 16.06 points, oe indexes closed at their lowest level since Feb. 23, nearly 3 weeks ago.

"There's not enough positive news to get investors to commit to new positions at this point," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "There's a malaise hanging over the market right now without much of a catalyst to move higher."

Concerns that higher oil prices, which topped $55 per barrel, would accelerate inflation and lead to rising interest rates eroded investor confidence, and the Pentagon's announcement about an anthrax discovery in its mailroom added to the general unease. The tech sector was hit particularly hard after a Merrill Lynch analyst said growth in chip stocks would be stalled for much of the year.

Intel (INTC) was off 1.1 percent at $24.01 and the Philadelphia Stock Exchange index of semiconductor stocks dropped nearly 2 percent. Shares of chip maker Applied Materials Inc. (AMAT) fell 2 percent to $16.20 after the company warned of waning sales to China.

"Intel is trading near new lows and that is dragging semiconductors down," said Robert Drust, managing director of listed trading at regional investment bank Wedbush Morgan. "The Dow would be positive if it wasn't for AIG. The story today is Intel and AIG."

American International Group Inc. (AIG) shares fell $1.93 to $61.92 after a major credit rating agency stripped the insurer of its coveted 'AAA' debt rating and a second threatened to do the same. On Monday, AIG's board decided to shunt aside long-time chief Maurice "Hank" Greenberg Monday.

Word that the Pentagon confirmed the presence of anthrax in its mail facility also weighed on trading.

Better-than-expected financial results from Lehman Brothers Holdings Inc. (LEH) helped the stock up 2.5 percent to $95.57. It reported fiscal first-quarter earnings and revenue that soundly beat Wall Street estimates.

Oil prices rose as investors worried that OPEC may not follow Saudi Arabia's lead and increase oil production. A barrel of light crude settled at $55.05, up 10 cents, on the New York Mercantile Exchange (search).

The bond market slipped lower, with the yield on the 10-year Treasury note rising to 4.54 percent from 4.51 percent late Monday. Gold prices fell slightly, while the dollar rose against the euro and was mixed against other major currencies.

The mood on Wall Street made it difficult for investors to build on good news from the retail sector. While the 0.5 percent growth in February retail sales fell slightly below Wall Street expectations, the Commerce Department (search) revised its January figure upward, and auto sales were surprisingly strong in both months.

A jury convicted former WorldCom Inc. Chief Executive Bernard Ebbers (search) of all counts related to an accounting scandal that cost investors billions of dollars.

"What got people's attention intraday was the Bernie Ebbers verdict and more importantly was anthrax being tested positive at the Pentagon mail center," said Ted Oberhaus, manager of equity trading at Lord Abbett & Co.

Federal Reserve Chairman Alan Greenspan (search) told the Senate Special Committee on Aging that U.S. lawmakers should act swiftly to shore up the Social Security retirement system and avoid economically crippling budget deficits in the future.

"People didn't really react to Greenspan, but they did react a little to the macroeconomic numbers -- i.e., the retail numbers," said Oberhaus. "The core retail sales number was slightly lower than people expected."

Genentech Inc. (DNA) slid 75 cents to $54.25 after it announced that studies showed its colon cancer drug Avastin was effective in treating lung cancer patients as well. The news led to two brokerage upgrades of Genentech's stock.

Amgen Inc. (AMGN), the world's largest biotech company, weighed on the Nasdaq, falling 3 percent, or $1.82, to $58.61. A U.S. appeals court on Tuesday sent back to a lower court a lawsuit charging that Amgen's arthritis drug Enbrel infringed a patent.

TiVo Inc. (TIVO) soared $2.87, or 74.9 percent, to $6.70 after the maker of television recorders agreed to a deal with Comcast Corp., the cable operator, that would make TiVo technology available to Comcast customers. Comcast was down 8 cents at $33.91.

Trading was active, with 1.51 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.83 billion shares were traded on Nasdaq, just above the 1.81 billion daily average last year.

Decliners outnumbered advancers on the New York Stock Exchange by 2 to 1 and by 3 to 2 on Nasdaq.

The Russell 2000 index of smaller companies was down 3.48, or 0.6 percent, at 626.82.

Overseas, Japan's Nikkei stock average fell 0.25 percent. In Europe, Britain's FTSE 100 closed up 0.51 percent, France's CAC-40 climbed 0.72 percent for the session, and Germany's DAX index rose 0.47 percent.

Reuters and the Associated Press contributed to this report.