New York: US stocks dropped for a second straight session on Wednesday as Libya’s violence sent oil prices up briefly to $100 a barrel and tech shares sank, adding credence to calls for a market correction.
Oil futures jumped to their highest since October 2008 amid worries about supply disruptions in Libya, a top oil producer. Late in the day, oil eased off the day’s highs, helping stocks trim losses.
The day’s drop follows a 2.1% decline in the S&P 500 on Wednesday, and the second straight session of above-average trading volume. However, since a modest correction is expected, investors at this point are taking the declines in stride.
“We’ve had a solid run-up here in the equity markets for an extended period, really without a correction, so long-term, this will be a good thing for the market to have a little bit of a pullback,” said Wayne Schmidt, chief investment officer at Gradient Investments In St. Paul, Minnesota.
The Nasdaq led losses as recent top gainers also lost ground, including Netflix, down 4.7% at $211.20, and Salesforce.com, down 2.5% at $133.37.
Hewlett-Packard late Tuesday cut its 2011 revenue forecast on slipping demand for its personal computers, and at least six brokerages cut their price targets on the stocks. Shares sank 9.6% to $43.59.
The S&P 500 has climbed nearly 25% since the start of September and many analysts have said a short-term correction is likely. However, the benchmark index recovered from hitting an intraday low of 1,299.55 during the session. Analysts eyed support at 1,296, the mid-January highs on the S&P 500, and also 1,286, the 50-day moving average.
“You saw a lot of shorts this morning, going into this market with anticipation of problems spreading in the Middle East, and now that people have made some money, you might see some short covering in the afternoon,” said Doreen Mogavero, CEO of Mogavero, Lee & Co. in New York.
Some saw the drop as a positive as it gives investors the chance to buy stocks on the dip, noting that the longer-term outlook remains bullish for stocks even if equity markets slip further.
“Whether this is it or whether we pull back another 3 or 4%, it’s healthy and probably warranted, given the run that we’ve had, and also given the uncertainty in the world -- particularly in the Middle East,” Schmidt added.
The Dow Jones industrial average fell 107.01 points, or 0.88%, at 12,105.78. The Standard & Poor’s 500 Index lost 8.04 points, or 0.61%, to 1,307.40. The Nasdaq Composite Index declined 33.43 points, or 1.21%, to 2,722.99.
Priceline.com shares jumped 6.8% to $455.08 in extended-hours trade after the online travel agency posted a higher quarterly profit as bookings increased 44%.
While higher oil prices often boost energy-sector shares, they usually drag on the overall stock market. Higher energy costs tend to reverberate through the economy, pushing up the costs of utilities, manufactured goods and transportation.
The S&P energy index gained 2%, while the Dow Jones Transportation Average shed 2.1%.
Thousands of Libyans celebrated the liberation of the eastern city of Benghazi from the rule of Muammar Gaddafi, who was reported to have sent a plane to bomb them on Wednesday as he clung to power.
Volume was active with about 10.32 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the daily average of 7.99 billion.
Declining stocks outnumbered advancing ones on the NYSE by 1,959 to 1,062, while on the Nasdaq, decliners beat advancers by 1,996 to 629.