US stocks: Market lower as oil gains

NEW YORK - US stocks declined on Wednesday as oil touched a two-week high and a profit warning from Network Appliance Inc. pushed tech stocks lower, ending the Nasdaq index's longest rally in five years.

Shares of blue-chip, economically-sensitive industrial companies, such as Honeywell International Inc., 3M Co. and Caterpillar Inc., were among the decliners.

The Dow Jones industrial average dropped 45.88 points, or 0.44 per cent, to close at 10,457.80. The Standard & Poor's 500 Index dropped 4.06 points, or 0.34 per cent, to 1,190.01. The technology-laced Nasdaq Composite Index dropped 11.50 points, or 0.56 per cent, to 2,050.12.

Oil prices, which had dropped last week fueling a rally in stocks, rose above US$51 a barrel for the first time in two weeks. Light, sweet crude for July delivery closed up US$1.31 at US$50.98 a barrel after the US government said oil inventories fell last week.

"This oil situation is still touchy," said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc., of St. Louis. "We're in a long-term US$40 to US$50 average kind of oil market ... We're just going to have to live with that." Higher oil prices weigh on the stock market because rising energy costs tend to depress corporate profits and consumer spending.

Tech shares were also off, with investors taking profits after the Nasdaq held its longest rally since December 1999.

"I can't remember the last time Nasdaq had an eight-day rally, so the gravity is kind of falling on the IT guys," said Bryan Piskorowski, market analyst at Wachovia Securities LLC, Richmond, Va.

Cisco Systems slipped 1.9 per cent to US$19.62, chipmaker Marvell Technology Group Ltd. was down 2.2 per cent to US$40.59 and Network Appliance was down 4.9 per cent to US$28.92.

In the health-care sector, shares of Boston Scientific Corp., which makes heart stents, were off 3.7 per cent after the company cut its 2005 profit outlook. Its shares slipped US$1.14 to close at US$29.46 on the NYSE.

Honeywell, an aerospace and industrial conglomerate, slipped 1.7 per cent to US$36.63; 3M, the maker of products ranging from medical supplies to Post-It notes, dipped 1.5 per cent to US$77.06 and Caterpillar, a heavy-equipment maker, was down 1.5 per cent at US$92.47.

Oil company shares rallied, with Exxon Mobil Corp., the world's largest publicly traded oil company, up 1.2 per cent to US$55.68. Rival Chevron Corp. was up 1.3 per cent at US$53.32.

The American Stock Exchange index of 11 energy companies .OIX closed up 1 per cent.

In the auto sector, shares of ailing parts supplier Visteon Corp. surged after customer and former parent company Ford Motor Corp. said it would spend up to US$1.15 billion on some of Visteon's unprofitable plants and up to 17,400 employees to help keep that firm afloat.

Visteon shares rose 14.4 per cent to close at US$7.17 and Ford eased 2 cents to US$9.96, both on the NYSE.

On the economic front, the Commerce Department said new orders for US durable goods jumped by a larger-than-expected 1.9 per cent in April. But excluding the volatile transportation category, orders for long-lasting US-made products such as washing machines and refrigerators dropped unexpectedly by 0.2 per cent. nN24340213

About 1.31 billion shares changed hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.52 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

"These holiday weekends have a way of turning into holiday weeks," said Robert Basel, managing director of Citigroup Global Markets, in New York. The coming three-day weekend includes the US Memorial Day holiday, with financial markets closed on Monday.

The number of shares that declined exceeded the number that rose on the NYSE by 11 to 5, and decliners also outpaced advancers on the Nasdaq market by 19 to 10.

- REUTERS