New York – Higher oil prices and news of slowing growth in the service sector pulled stocks lower Monday despite some optimism over a $25 billion bid for Guidant Corp.
Inflation worries again plagued Wall Street as crude futures neared $60 per barrel, reinforcing concerns that the Federal Reserve might continue lifting interest rates to stem inflation from increased energy costs.
Last week, the market broke a five-week rally after a string of government reports painted a rosier picture of the economy than many had predicted. That economic strength could justify more interest rate hikes and halt Wall Street’s year-end advance, said Bill Groenveld, head trader at Finance Investments.
“Whether the market flattens out for the next couple of weeks, there’s always going to be uncertainty about the future,” Groenveld said. “It’s going to be a real news-sensitive market over the next quarter.”
Stocks retreated after the Institute for Supply Management reported a slowdown in the service sector despite rebounds in new orders and employment. Investors, however, shrugged off a drop in the prices paid index, which bodes well for inflation.
The Dow Jones industrial average lost 42.50, or 0.39 percent, to close at 10,835.01.
Broader stock indicators were also lower. The Standard & Poor’s 500 index fell 2.99, or 0.24 percent, to 1,262.09, and the Nasdaq composite index dropped 15.73, or 0.69 percent, to 2,257.64.
The Bloomberg Colorado Index, a price-weighted list of companies based in the state, rose 0.43 to 323.11.
Bond prices extended last week’s sell-off, with the yield on the 10-year Treasury note rising to 4.57 percent from 4.52 percent late Friday. The dollar declined against other major currencies, while gold prices continued climbing above $500 per ounce.
Forecasts for the Northeast’s first big snowstorm triggered a run-up in energy prices. A barrel of light crude added 59 cents to settle at $59.91 on the New York Mercantile Exchange, but natural gas, a common heating fuel, tumbled 27.1 cents to $13.66 per 1,000 cubic feet after surging more than 50 cents during in the session.
