Wall Street sinks as oil hits car sales, profits

1/07/2008 - 18:48

By Deborah Jian Lee

NEW YORK (Reuters) - Stocks fell on Tuesday, putting the Dow on the cusp of a bear market, as high oil prices dragged down U.S. car sales while tough credit conditions threatened the financial sector.

Shares of automakers slid following reports of a June sales slide, with Ford Motor Co down almost 7 percent.

Declines were widespread, but shares of financial services companies, big manufacturers, miners and technology companies took most of the beating as concerns about the economy grew.

Shares of aluminum producer Alcoa Inc fell more than 5 percent, and was the Dow's top drag, while software maker Microsoft Corp, down more than 3 percent, weighed on the S&P 500.

Among financial shares, shares of Bank of America Corp, the No. 2 U.S. bank, fell more than 4 percent, while shares of JPMorgan Chase & Co, the No. 3 U.S. bank, declined almost 4 percent. Shares of Citigroup, the No. 1 U.S. bank, were down nearly 2 percent.

"Oil is a problem," said Chip Hanlon, president of Delta Global Advisors, Inc. in Huntington Beach, California. He said a report showing a modest improvement in manufacturing "is not strong enough to mitigate everybody's fear."

An unexpected rise in the Institute for Supply Management's manufacturing index for June helped to temper some of the worries, but gains were short-lived.

"I would not trust any rally from here. A lot of people are calling for a rally to start soon. I personally wouldn't trust any bounce that started from here," Hanlon said.

The Dow Jones industrial average fell 149.24 points, or 1.31 percent, to 11,200.77. The Standard & Poor's 500 Index

declined 16.14 points, or 1.26 percent, to 1,263.86. The Nasdaq Composite Index slid 29.91 points, or 1.30 percent, to 2,263.07.

The Dow could officially enter a bear market if it closes down 20 percent below its record finish set last October.

U.S. front-month crude rose $2.16 to $142.15 on the New York Mercantile Exchange, a day after it hit an intraday record of $143.67 a barrel.

Alcoa shares fell to $33.49 on the New York Stock Exchange. Analysts cited concerns that rising costs of raw materials would hurt the company's margins.

Among financials, shares of Bank of America fell to $22.91, while JPMorgan Chase dropped to $32.80. Shares of Citigroup fell to $16.47. The KBW bank index .BKX> fell almost 2 percent.

On the Nasdaq, shares of Microsoft led losers, falling to $26.63.

Ford shares tumbled to $4.49 on the NYSE after the automaker posted a 28 percent slide in June sales as soaring gasoline prices cut demand for trucks and SUVs. Shares of General Motors, which was yet to report its sales, fell 6.4 percent to $10.76.

On a positive note, shares of commercial lender CIT Group Inc skyrocketed more than 14 percent to $7.78 after the company said agreed to sell its home lending business and other housing portfolio holdings.

(Additional reporting by Ellis Mnyandu; Editing by Kenneth Barry)

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