US stocks: Market drops as oil surges and dollar slides

NEW YORK - US stocks tumbled across the board Tuesday as oil prices surged above US$51 a barrel and the dollar fell, with markets worried that central banks were diversifying reserves out of US assets.

All but one of the 30 stocks in the blue-chip Dow Jones industrial average closed the day lower as the Dow and the broader Standard & Poor's 500 index suffered their largest percentage drops in more than five months.

Home Depot Inc. fell 4.1 per cent to US$40.28. The world's largest home-improvement retailer posted profits that failed to exceed Wall Street estimates, analysts said.

But crude was the main focus during the session, climbing to a 15-week high amid cold winter weather in Europe and the United States, stoking fears that higher energy costs will hurt corporate profits and curb consumer spending.

The dollar also weighed on markets as the greenback suffered its biggest intraday fall against the euro since August. South Korea's central bank said on Monday it planned to diversify its reserves, the world's fourth largest, into a greater variety of currencies.

A weaker dollar could diminish foreign investors' appetite for some US assets.

The Dow Jones industrial average closed down 174.02 points, or 1.61 per cent, at 10,611.20. The Standard & Poor's 500 Index fell 17.43 points, or 1.45 per cent, to 1,184.16. The technology-laced Nasdaq Composite Index was down 28.30 points, or 1.37 per cent, at 2,030.32.

"The causes were the leap in the price of oil today and the fact that South Korea says it is going to diversify out of the dollar to some degree, said Jeffrey Saut, Raymond James Financial's chief investment strategist.

Neil Massa, senior trader at John Hancock Funds, said that a weaker dollar could lead to worries of interest-rate hikes to encourage investors to buy US assets.

Trading in stocks was heavy, with 1.74 billion shares changing hands on the New York Stock Exchange, above last year's daily average of 1.46 billion.

About 2.06 billion shares were traded on Nasdaq, above last year's 1.81 billion daily average. Decliners outnumbered advancers by about 4-to-1 on the NYSE and by about 3-to-1 on Nasdaq.

NYMEX March crude settled US$2.80 higher at US$51.15 a barrel. Oil prices have risen about US$5 in the last two weeks amid stronger-than-expected demand growth and disappointing supply forecasts from producers outside Opec -- especially Russia.

Semiconductor stocks were among the gainers after Smith Barney raised its sector weighting on semiconductors and semiconductor equipment group. Texas Instruments Inc. rose 1 per cent to US$25.57.

Gold stocks benefited from the dollar's fall. Newmont Mining Corp., the world's leading gold miner, rose about 4.8 per cent to US$44.50.

Kerr-McGee Corp. rose 5.3 per cent to US$74.20 after news on Friday that billionaire financier Carl Icahn and one of his funds plan to buy up to US$1 billion in the oil and gas producer's stock.

Federated Department Stores Inc. fell 2.5 per cent to US$55.29 on speculation about a merger with rival May Department Stores. May's shares rose 17 cents to US$33.62.

Federated, the parent of Macy's and Bloomingdale's, also said first-quarter earnings could slip below the average of analysts' expectations.

In economic news, US consumer confidence eased in February but remained above year-ago levels, a private business group said.

The Conference Board's gauge of consumer confidence eased to 104.0 in February from a revised 105.1 in January. The Conference Board had earlier reported January at 103.4. The index was above economists' forecast for a February reading of 102.9.

- REUTERS