Stocks plunge on oil, credit worries NEW YORK - Wall Street plunged in early trading Thursday as surging oil prices and slower growth in consumer spending erased optimism about the Federal Reserve's positive take on the economy just a day earlier. The Dow Jones industrials skidded more than 200 points. Inflation fears revived as crude oil vaulted to a record $96 a barrel. Meanwhile, a report from the Commerce Department indicated consumers scaled back their spending in September as worries mounted about a worsening housing market and further credit market turmoil. That combination led investors to retreat from Wednesday's rally, in which the Dow climbed 137 points after the Fed, while cutting interest rates a quarter point, said the economy had weathered the summer's credit crisis. The assessment put temporarily put to rest Wall Street's concerns that tighter credit was crippling the economy. But the Fed also warned that inflation remained a concern, and oil's ascent raised the prospect not only that the Fed might stop cutting rates, but that it might actually consider raising rates. Stocks also moved lower after Exxon Mobil Corp., the world's biggest oil company, posted a second-straight retreat in quarterly profit for the first time in five years. Citigroup Inc. and Bank of America Corp., the two biggest U.S. banks, were downgraded by CIBC on worries about the credit markets — causing financial stocks to tumble. The Dow plunged 217.04, or 1.56 percent, to 13,712.97. The Standard & Poor's 500 index was off 25.73, or 1.66 percent, at 1,523.65, while the Nasdaq composite index dropped 39.96, or 1.40 percent, to 2,819.16. Investors pulling money out of stocks turned to the safe haven of the Treasury market. The yield on the 10-year Treasury note fell to 4.41 percent from 4.47 percent late Wednesday. The Commerce Department's report that consumer spending rose by 0.3 percent in September, slightly lower than the 0.4 percent increase that analysts expected, raised concerns about a slowing economy, and worries that the Fed might still consider inflation a more important issue. Crude prices pulled back after surpassing $96 per barrel in overnight trading, but that decline did not ease Wall Street's worries. A barrel of light sweet crude fell $1.60 to $92.93 on the New York Mercantile Exchange. Also Thursday, the Labor Department said the number of people filing for unemployment benefits declined by a larger-than-expected 6,000 last week to total 327,000. Wall Street was also troubled by the day's corporate news, including Exxon's report that its profit fell 10 percent during the third quarter because of lower refining and chemical margins. Shares of the Dow component dropped $2.17, or 2.4 percent to $89.80. Financial stocks fell on lingering worries about the aftereffects of the credit crisis. CIBC World Markets on Thursday downgraded both BofA and Citigroup on concerns about sluggish growth in 2007. Bank of America, the nation's second-largest bank, dropped $1.43 to $46.91. Citi, the nation's largest financial institution, dropped $2.87, or 6.8 percent to $38.54. Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to 68.2 million shares. The Russell 2000 index of smaller companies was down 18.45, or 2.23 percent, at 809.57. The plunge in U.S. stocks caused European bourses to tumble. In afternoon trading, Britain's FTSE 100 was down 1.66 percent, Germany's DAX index fell 1.33 percent, and France's CAC-40 dropped 1.80 percent. Japan's Nikkei stock average, which closed before U.S. markets opened, rose 0.79 percent. |