NEW YORK: US stocks tumbled on Friday after oil prices hit a record level, a manufacturing report indicating increasing prices re-ignited inflation fears and American International Group Inc slid 8%.
The Dow came close to breaching its intra-day low for 2005, and ended at its lowest for more than two months.
AIG was the biggest single downward influence on the Dow, falling US$4.46 to US$50.95, as investigations into the insurer expanded and three more staffers in its legal department quit their jobs.
Meanwhile, Nymex May crude oil futures rose US$1.87 to settle at US$57.27 a barrel, after earlier hitting a record of US$57.70 a barrel. The surge came a day after a report issued by Goldman Sachs said oil prices could spike to US$105 a barrel.
High oil prices weigh on equities because they hurt corporate profits and consumer spending.
The Dow Jones industrial average was down 99.46 points, or 0.95%, to end at 10,404.30. The Standard & Poors 500 Index was down 7.67 points, or 0.65%, to close at 1,172.92.
The technology-laced Nasdaq Composite Index was down 14.42 points, or 0.72%, to finish at 1,984.81.
For the week, the Dow closed down 0.37%, while the Nasdaq ended down 0.31%, and the S&P 500 finished up 0.13%.
All the fears that were out there during the month of March, such as higher rates, inflation and higher oil, all came to the surface, said Larry Peruzzi, senior equity trader at The Boston Co Asset Management, a Mellon subsidiary.
Stocks initially rallied on a report showing weaker-than-expected jobs growth, which was seen diminishing the likelihood that the Federal Reserve will raise interest rates at a more aggressive pace.
US employers created only 110,000 new jobs in March, the smallest gain in eight months, the Labor Department said, and half economists forecast.
The unemployment rate, calculated from a separate survey, declined to 5.2% from 5.4%. And average hourly earnings rose 4 cents from February to US$15.95 in March.
But a manufacturing report indicating increasing prices stirred inflation fears.
The Institute for Supply Management's index of manufacturing activity for March fell to 55.2 from 55.3 in February, only slightly ahead of expectations. The ISM's manufacturing prices-paid index climbed to 73.0 in March from 65.5 in February.
We started off the day with an employment report which looked like it was a good report, with the unemployment rate dropping to 5.2%, but we didnt see much on the non-farm payrolls which the market liked, Peruzzi said.
Then we had the ISM. Everyone focused in on the prices-paid component of the ISM, which was a huge upset and the market rolled over and really hasnt come back, and oil piles on by rallying 3% today.
Stocks sensitive to high oil prices tumbled, such as industrials that have raw materials costs and retailers who serve customers sensitive to higher gasoline costs.
Discounter Wal-Mart Stores Inc fell 2.2%, or US$1.12, to US$48.99, while heavy equipment maker Caterpillar Inc dropped 1.4%, or US$1.29, to US$90.15.
Energy companies rose as oil prices soared. Exxon Mobil Corp. climbed 1.6%, or 95 cents, to US$60.55, while ChevronTexaco Corp rose 1.7%, or US$1.00, to US$59.31.
Among other stocks moving, Best Buy Co Inc, the top US electronics retailer, forecast current-year profit below many analysts estimates. Its stock fell 6.3%, or US$3.41, to US$50.60 on the NYSE.
Taser International Inc tumbled 13%, or US$1.58, to US$10.42 after it said first-quarter revenue would miss Wall Street estimates and blamed adverse publicity about the safety of its stun guns.
Overall, trading was active, with 1.74 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.89 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.
Decliners outnumbered advancers on the New York Stock Exchange by about 3 to 2, according to the NYSE.
On the Nasdaq, decliners outnumbered advancers by about 2 to 1. Reuters