US Stocks Close Lower 09/16 16:23
Airlines, cruise lines and other companies in fuel-dependent industries
dragged U.S. stocks lower Monday after an attack on Saudi Arabia's biggest oil
processing facility sent crude prices soaring.
(AP) -- Airlines, cruise lines and other companies in fuel-dependent
industries dragged U.S. stocks lower Monday after an attack on Saudi Arabia's
biggest oil processing facility sent crude prices soaring.
The U.S. and international benchmarks for crude each vaulted more than 14%
-- that's comparable to the 14.5% spike in oil on Aug. 6, 1990, following
Iraq's invasion of Kuwait.
The Dow Jones Industrial Average fell 0.5% to break a streak of eight
consecutive gains. The S&P 500, while down modestly, had its biggest decline in
two weeks. American Airlines was the biggest decliner in the index.
Shares of oil producers jumped, while prices for Treasurys, gold and other
investments seen as less risky rose.
The weekend attack halted production of 5.7 million barrels of crude a day,
more than half of Saudi Arabia's global daily exports and more than 5% of the
world's daily crude oil production. President Donald Trump warned that the
United States was "locked and loaded" to respond as his administration pinned
the blame on Iran, which supports the Yemeni rebels who took credit for the
The attack raised worries about the risk of more disruptions in the supply
of oil at a time when the global economy's strength is seen as shaky.
Still, analysts expressed doubts that the disruption in Saudi Arabia's oil
production would have much of an impact on the U.S. economy, at least in the
"From a global perspective, there's probably a concern," said Willie
Delwiche, investment strategist at Baird. "From a U.S. perspective, we produce
more now than we used to, and our economy is less dependent on oil than it used
The S&P 500 fell 9.43 points, or 0.3%, to 2,997.96. That's the index's
largest loss since Sept. 3.
The Dow Jones Industrial Average slid 142.70 points to 27,076.82. The Nasdaq
lost 23.17 points, or 0.3%, to 8,153.54.
Small stocks in the Russell 2000 were better performers. The index rose 6.46
points, or 0.4%, to 1,584.60.
Major stock indexes in Europe also fell. Markets in Asia finished mixed.
The stock market has been volatile since the summer, as worries waxed and
waned about the U.S.-China trade war. The most recent move for stocks had been
higher, boosted by renewed optimism in recent weeks about easing tensions
between Washington and Beijing, and the S&P 500 had climbed back within 1% of
Stocks lost their recent upward momentum Monday as investors weighed the
implications of the attack in Saudi Arabia.
While analysts expected that the attack would only disrupt oil supplies
temporarily, the bigger threat is the worry about more attacks in the future.
"At a time when oil markets have been in the shadows of a weak global
macroeconomic backdrop, the attack on critical Saudi oil infrastructure calls
into question the reliability of supplies from not just one of the largest net
exporters of crude oil and petroleum products but also the country that holds
most of the world's spare production capacity," Barclays analyst Amarpreet
Singh wrote in a report.
Benchmark U.S. crude oil soared $8.05 to settle at $62.90 a barrel. Brent
crude oil, the international standard, jumped $8.80 to close at $69.02 a barrel.
That helped energy stocks in the S&P 500 surge 3.3%. Marathon Oil gained
11.6%, Devon Energy jumped 12.2% and oilfield services provider Halliburton
The spike in oil prices weighed on shares in airlines, whose operations can
be hurt by any rise in the price of fuel.
American Airlines Group, which spent $3.7 billion on fuel and taxes in the
first half of the year, dropped 7.3%. United Airlines slid 2.8%, and Delta Air
Lines dropped 1.6%.
Cruise ships also burn lots of fuel, making them vulnerable to oil price
swings. Carnival fell 3.2%.
Prices for U.S. government bonds rose as investors moved into safer
investments. Yields for bonds fall when their prices rise, and the yield on the
10-year Treasury dropped to 1.85% from 1.90% late Friday. The yield on the
two-year Treasury, which moves more on expectations for Fed policy, sank to
1.76% from 1.79%.
Gold, another investment seen as a safer place to park money, rose $12.20 to
$1,503.10 per ounce.
Meanwhile, general Motors slumped 4.3% after more than 49,000 members of the
United Auto Workers went on strike. It wasn't clear how long the walkout would
Small stocks once again did better than their larger rivals. The Russell
2000 is up nearly 7% since Sept. 4, while the big stocks in the S&P 500 are up
only about 2%. If the trend lasts, it will mark a sharp turnaround from the
last year, which saw big companies dominate their smaller rivals as worries
about a possible recession pounded stocks seen as riskier investments.
That long stretch of sharp underperformance may have created a raft of
bargains, some analysts say. Small stocks recently hit their cheapest level
relative to the big stocks in the Russell 1000 since the summer of 2003,
according to Jefferies.
The week's headline event is the Federal Reserve's meeting on interest
rates. Investors are confident the central bank will cut short-term rates by a
quarter of a percentage point to a range of 1.75% to 2%. It would be the second
such cut in two months, as the Fed tries to protect the economy from a global
slowdown and the effects of the U.S.-China trade war.
Investors will be looking for clues about what the Fed does next.
"The forward guidance is going to be critical," said Keith Buchanan,
portfolio manager, at Globalt Investments.
In other commodities trading Monday, wholesale gasoline rose 20 cents to
$1.75 per gallon. Heating oil climbed 20 cents to $2.08 per gallon. Natural gas
rose 7 cents to $2.68 per 1,000 cubic feet.
Silver rose 46 cents to $17.90 per ounce and copper fell 6 cents to $2.62
The dollar fell to 108.05 Japanese yen from 108.13 yen on Friday. The euro
weakened to $1.1006 from $1.1068.