NEW YORK — The stock market had another late-day slide Wednesday, this time because of fears that the gulf oil spill will threaten BP’s dividend and perhaps land the company in bankruptcy court.
The Dow Jones industrials, up about 125 points late in the morning, closed down 41. Most selling came in the last hour, the third time in four days that stocks had a late-day drop.
Investors got a “sell” signal from news reports that raised the possibility of worsening financial fallout from the spill.
A group of about 30 U.S. lawmakers sent a letter to BP chief executive Tony Hayward asking him to halt dividend payments and advertising until the leaking well is capped and the spill is cleaned up. Investors tend to sell any time a company’s dividend appears to be in jeopardy. BP is scheduled to make a $2.63 billion payout June 21.
And quoted an analyst as saying BP could be forced to seek bankruptcy protection within a month.
The worries about BP were enough to make investors shrug off reassuring words about the economy early in the day from Federal Reserve Chairman Ben Bernanke. BP fell 15.8 percent to a 14-year low, and selling spread to other energy companies. Anadarko Petroleum, a part-owner of the rig that caused the spill, dropped 18.6 percent.
The slide in energy stocks halted the market’s upward momentum, said Peter Boockvar, equity strategist at Miller Tabak.
“The oil stocks are getting killed. They’re widely owned, so any time you see that kind of activity, it makes people nervous,” Boockvar said.
The drop came a day after the Dow climbed 123 points on easing concerns that the economy would fall back into recession.
The Dow fell 40.73, or 0.4 percent, to 9,899.25 after trading as high as 10,065.14. The Standard & Poor’s 500 fell 6.31, or 0.6 percent, to 1,055.69, while the Nasdaq composite fell 11.72, or 0.5 percent, to 2,158.85.
Many traders have been anxious since last month that problems including the gulf spill and spending cuts in Europe would slow the economic recovery. The concerns have pounded U.S. stocks since they set 2010 highs in late April. They are down more than 10 percent since then, a drop large enough to be considered a “correction.”
David Chalupnik, head of equities at First American Funds in Minneapolis, said it’s most likely that Bernanke is right that the economy will continue to recover but that trading will remain choppy. He said traders won’t get a better sense about how the economy is holding up until July, when earnings reports and more economic numbers come out.
“We’re probably in the fifth inning of the correction. Maybe the sixth inning,” Chalupnik said. “The next month, I think, is just going to be extremely volatile.”
