The Dow Jones industrial average finished lower by 163.48 points, or 1.61%, to 9,963.03. The broader Standard & Poor's 500 index fell 17.93 points, or 1.63%, to 1,080.7. The tech-heavy Nasdaq composite dropped 33.43 points, or 1.8%, to 1,821.63.
Blue-chips were negative across the board, with the exception of Hewlett-Packard (HPQ
Worries about supply pushed crude oil prices up $1.58 to a 21-year closing high of $44.41 per barrel in Nymex trading. The latest surge came as Russia's Justice Ministry revoked permission for major oil concern Yukos to use its bank accounts to finance daily operations and pay transport fees to ensure oil exports.
"The relationship between oil and equities has been fierce in the last few weeks and this is a factor that might come into play again on Friday," says Paul Cherney, chief market analyst for Standard & Poor's.
Investors were also unnerved by the latest terrorism headlines. According to media reports, two men with links to a terrorist group were arrested in Albany, N.Y.
Retailers stumbled Thursday as chains reported a mixed bag of comparable store sales for the month of July. Investors are also nervous that high oil prices will cut into spending as we head into the colder months. Among the merchants moving lower on soft July sales: Gap (GPS
), AnnTaylor (ANN
), and Urban Outfitters (URBN
However, teen retailers American Eagle (AEOS
), Aeropostale (ARO
), and Pacific Sunwear (PSUN
) bucked the trend to move higher.
Discounters Wal-Mart (WMT
) and Target (TGT
) announced low single-digit comparable store sales for July.
"We continue to see rough waters ahead for retailers in the second half," writes Bernstein analyst Emme Kozloff. Sales growth comparisons get tougher in August, Kozloff notes, citing high energy prices as a factor.
While rising oil and gasoline prices have been a cloud over investors, U.S. energy companies like ConocoPhillips (COP
) and Amerada Hess (AHC
) have benefited. Both companies reported strong results Wednesday.
In other earnings news, Sara Lee (SLE
) posted a 20% increase in second-quarter profit, but guided analysts lower on earnings for the current quarter.
Drugmaker Bristol-Myers Squibb (BMY
) will pay $150 million to settle civil fraud charges, a record-sized settlement for any U.S. corporation.
The latest update on initial U.S. jobless claims showed a fall of 11,000 last week. Initial jobless claims dropped to 336,000 in the week ended July 31 from a revised 347,000 in the prior week. The drop was slightly larger than predicted and was another promising sign for the labor market.
Investors Friday morning will digest the July employment report. Economists on average expect 243,000 new jobs to be added on the month. The unemployment rate is expected to hold steady at 5.6%. The report is due at 8:30 a.m. ET.
No major earnings updates are due Friday.
U.S. Treasuries surged higher in a seventh straight session of gains amid rising oil prices and speculation that Friday's update on July jobs may fall short of expectations. Yields dipped once again, with the 10-year note finishing around 4.40%.
The Treasury Dept. will sell a smaller than expected $51 billion in debt at its quarterly refunding next week, reports Informa Global Markets. Of that amount, $22 billion will be raised with the sale of 3-year notes Monday, followed by $15 billion in 5-year notes Wednesday and $14 billion in 10-year notes on Thursday.
European stock markets finished higher despite nagging worries about oil prices. A dip overnight in crude oil from record highs helped buoy investors. London's Financial Times-Stock Exchange 100 index added 5.3 points, or 0.12%, to 4,413.4. In Paris, the CAC 40 rose 15.4 points, or 0.43%, to 3,622.98. Germany's DAX index climbed 5.59 points, or 0.14%, at 3,829.03.
Asian stock markets advanced. Japan's Nikkei 225 index rose 50.87 points, or 0.46%, to 11,060.89, as investors scooped up beaten-down tech stocks. Hong Kong, the Hang Seng index added 211.6 points, or 1.72%, 12,491.92.