New York: US stocks tumbled on Wednesday, halting a four-day winning streak, as falling oil prices hit energy shares, while less upbeat economic reports rekindled worries about recovery prospects.
Oil prices slipped more than 3% after a surprise build-up in inventories. Shares of energy companies, including Chevron Corp, off 1.6%, were top drags, along with other natural resource companies and big manufacturers such as Boeing Co, down almost 2%.
Investors took a one-two punch from data showing the vast service sector contracted for the eight straight month in May and from a report showing employers axed 532,000 private-sector jobs last month.
The data, which fell short of consensus expectations, signaled the revival in consumer and business spending, crucial for profit growth, will take longer than previously thought.
“In the last few days we’ve had a strong rally, but the fact of the matter is that the economy is still struggling right now,” said Giri Cherukuri, head trader at OakBrook Investments LLC, which oversees $1.3 billion in Lisle, Illinois. “When the economy is slow, earnings aren’t going to be so good.”
The Dow Jones industrial average dropped 65.63 points, or 0.75%, to 8,675.24. The Standard & Poor’s 500 Index shed 12.98 points, or 1.37%, to 931.76. The Nasdaq Composite Index declined 10.88 points, or 0.59%, to 1,825.92.
Since the stock market’s run-up from the 12-year low of early March investors have been eager to get more definitive signs that the recession is abating, but Wednesday’s economic reports tempered some of the recent optimism.
Federal Reserve chairman Ben Bernanke said in an appearance before the House Budget Committee he expected to see “some positive growth later this year” but not robust growth.
Chevron shares fell 1.6%, to $68.26, while Exxon Mobil shares declined 1.2% to $72.08. The S&P energy index fell 3.3%.
US front-month crude settled down $2.43, or 3.5% to $66.12 a barrel after government data showed a surprise build-up in inventories in the recent week.
Commodities companies were also hit as the dollar strengthened more than 1% against a basket of currencies depressing the value of commodities denominated in the US currency.
Among big industrial names, plane maker Boeing shares dropped 1.7% to $48.37, while chemical company DuPont Co slid 3.9% to $28.89, making the stock the Dow’s top drag for the session.
Technology shares were not spared in the sell-off, with BlackBerry devices maker Research In Motion off 2.6% to $80.48 on the Nasdaq. The semiconductor index shed 2.2%.
Economists expect the Labour Department’s May non-farm payrolls survey to show a decline of 520,000 jobs, according to a Reuters survey. The unemployment rate is forecast to jump to 9.2% from 8.9% in April.
Since the 12-year low of 9 March, the S&P 500 has risen nearly 40 percent.
Volume was moderate on the New York Stock Exchange, where about 1.32 billion shares changed hands, below last year’s estimated daily average of 1.49 billion. On the Nasdaq, about 2.31 billion shares were traded, above last year’s daily average of 2.28 billion.