Market falls on oil surge and profit worries

22/04/2008 - 17:54

By Cal Mankowski

NEW YORK (Reuters) - Stocks fell on Tuesday as surging oil prices escalated concerns about how higher energy costs will affect the economy, profits and consumer spending, while disappointing earnings outlooks also darkened the mood.

All three major U.S. stock indexes dropped more than 1 percent, while an index of airline stocks <.XAL> plunged 11.6 percent and an index of retailers' shares <.RLX> slid 2.6 percent as crude oil futures rose $2 to a record above $119 per barrel.

Microchip maker Texas Instruments Inc said its second quarter would be weaker than expected due to an uncertain economic situation and cited customer caution and weak demand for high-end cell phones. Its stock fell 6.6 percent to $28.58.

UnitedHealth Group Inc posted a lower-than-expected first-quarter profit, hurt by weakness in its business serving employers and slashed its full-year earnings forecast. Its shares fell 10.6 percent to $33.79.

"The price of oil is the over-arching issue," said Matt Kaufler, portfolio manager and equity analyst at Clover Capital Management in Rochester, New York. "Everyone keep saying that it's overdone but the price keeps going up. The more it stays elevated, the more inflation fears becomes cemented in."

The Dow Jones industrial average <.DJI> was down 145.34 points, or 1.13 percent, at 12,679.68. The Standard & Poor's 500 Index <.SPX> was down 16.31 points, or 1.17 percent, at 1,371.86. The Nasdaq Composite Index <.IXIC> was down 42.19 points, or 1.75 percent, at 2,365.85.

On the Nasdaq, shares of online DVD rental company Netflix Inc fell 22 percent to $30.72. The company reported quarterly profits late on Monday that met expectations but disappointed some who were hoping for more. The company's gross profit margin declined.

Dow component McDonald's Corp , posted quarterly profit above expectations, boosted by strong overseas sales. But its shares fell 0.2 percent to $58.56, as the company also said sales fell slightly in March at U.S. restaurants open at least 13 months.

Shares of UAL Corp , parent of United Airlines, fell 34 percent to $14.25 after the company reported a quarterly loss that was more than triple a year ago on soaring fuel costs .

AirTran Holdings , parent of AirTran Airways, also reported a loss as did JetBlue Airways . Shares of AirTrain were down 24 percent to $3.47 and JetBlue declined 7.1 percent to $4.58

In economic news, the National Association of Realtors said the pace of existing home sales in the United States fell 2 percent in March, in a report that showed the U.S. housing market continues to struggle.

(Editing by Jan Paschal)

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