Stocks fal­ter as price of oil slides

Los Angeles Times - - COMPANY TOWN -

U.S. stock in­dexes re­treated from their record heights Tues­day af­ter a slump in oil prices weighed on en­ergy com­pa­nies.

Losses were wide­spread, with five stocks drop­ping on the New York Stock Ex­change for ev­ery two that rose. Many of the sharpest de­clines were con­cen­trated in the en­ergy sec­tor.

The price of oil touched its low­est price since midNovem­ber.

Bench­mark U.S. crude fell 97 cents, or 2.2%, to set­tle at $43.23 a bar­rel. Brent crude, the international stan­dard, fell 89 cents to $46.02 a bar­rel.

Oil has been slosh­ing be­tween $40 and $55 a bar­rel for much of the last year, down from a peak of more than $110 in sum­mer 2013. Drillers have got­ten much bet­ter at pulling oil from the ground, which has helped sup­plies to bal­loon and thus weighed on prices. Many oil­pro­duc­ing coun­tries have banded to­gether to cut pro­duc­tion, but an­a­lysts are skep­ti­cal about how much they can in­flu­ence prices.

A main rea­son the stock market has climbed to record af­ter record this year has been the resurgence in profit growth for big com­pa­nies, and the en­ergy sec­tor is ex­pected to play a lead­ing role in that. An­a­lysts fore­cast en­ergy com­pa­nies in the S&P 500 will re­port bet­ter than 300% growth in their earn­ings per share this year. But if the price of oil keeps drop­ping, that’s at risk.

John Man­ley, chief eq­uity strate­gist at Wells Fargo Funds Man­age­ment, is still op­ti­mistic that ex­pec­ta­tions for earn­ings across the market can keep ris­ing. Lower oil prices would un­der­cut profits for en­ergy stocks, but lower fuel bills should help other in­dus­tries.

And as long as profits con­tinue to rise, Man­ley said, stocks can too.

On Tues­day, Transocean sank 4.2% to $8.20 and Marathon Oil slid 3.4% to $12.06.

The big­gest de­cliner in the S&P 500 was Chipo­tle Mex­i­can Grill, which slid 7.3% to $425.60 af­ter the restau­rant chain said mar­ket­ing costs will eat up a slightly big­ger cut of rev­enue this quar­ter than last.

On the op­po­site end was home builder Len­nar, which rose 2.1% to $53.87 af­ter re­port­ing stronger rev­enue and earn­ings than ex­pected.

Reliance Steel & Alu­minum fell 3.7% to $69.84 af­ter the Los An­ge­les firm low­ered its earn­ings fore­cast.

Bond prices rose. The yield on the 10-year Trea­sury note fell to 2.15% from 2.19%.

The euro fell to $1.1128 from $1.1147. The dol­lar fell to 111.41 yen from 111.54 yen.

Gold fell $3.20 to set­tle at $1,243.50 an ounce, sil­ver fell 9 cents to $16.42 an ounce, and cop­per fell 4 cents to $2.55 a pound. Nat­u­ral gas rose a penny to $2.91 per 1,000 cu­bic feet. Heat­ing oil fell 2 cents to $1.39 a gal­lon. Whole­sale gaso­line fell 3 cents to $1.42 a gal­lon.

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