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US stocks open lower as oil prices bounce higher; Bernanke says deep downturn unlikely

US stocks open lower as oil prices bounce higher; Bernanke says deep downturn unlikely

Wall Street declined Tuesday as oil prices ratcheted higher and as speculation grew that the Federal Reserve might raise interest rates to fight inflation.
The International Energy Agency said oil-producing nations outside OPEC are having a tough time keeping up with demand. The agency lowered its forecast for global oil demand because of the recent surge in prices, but said China might need more for reconstruction in the aftermath of May's earthquake.
This sent a barrel of light, sweet crude up $1.86 to $136.21 on the New York Mercantile Exchange. Crude prices last week climbed to a record high of $139.12.
Meanwhile, comments from Federal Reserve Chairman Ben Bernanke that a substantial economic downturn seems unlikely have raised expectations that the U.S. central bank might raise interest rates to fight inflation.
The rise in oil weighed on stocks. In midmorning trading, the Dow Jones industrial average fell 32.65, or 0.27 percent, to 12,347.67.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 7.51, or 0.55 percent, to 1,354.25, and the Nasdaq composite index fell 17.56, or 0.71 percent, to 2,441.90.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.02 percent from 3.99 percent late Monday.
The dollar was mixed against other major currencies, while gold fell.
The rise in energy remains a concern for Bernanke, who on Monday reiterated during a speech that higher energy prices "suggest that growth risks remain to the downside." His assertion that the chance of a substantial downturn has decreased is raising Wall Street's expectations that the central bank might soon be comfortable in raising interest rates.
The central bank is worried that escalating commodities prices might curb consumers' appetite to buy discretionary items. This would pose a serious threat to the U.S. economy, as consumer spending accounts for more than two-thirds of economic activity.
In other economic news, the Commerce Department reported that the U.S. trade deficit had a larger-than-expected jump in April. Higher oil prices and an increase in consumption for crude offset a climb in exports, the government said.
The deficit in international trade of goods and services increased by 7.8 percent to $60.90 billion from March's revised $56.49 billion. The trade gap was forecast to rise to $59.5 billion, according to economists surveyed by Thomson/IFR.
In corporate news, Texas Instruments Inc. fell 72 cents, or 2.3 percent, to $30.61 after narrowing its second-quarter revenue and earnings expectations late Monday.
Billionaire Kirk Kerkorian's investment company said its tender offer for 20 million additional shares of Ford Motor Co. attracted a huge response and will easily enable it to increase its stake in the automaker to about 5.5 percent. The Dearborn, Michigan-based automaker said last month that it no longer expected to return to profitability by 2009. Ford fell 31 cents, or 4.9 percent, to $6.05.
XTO Energy Inc. said it is acquiring privately held Hunt Petroleum Corp. for $4.19 billion in cash and stock. XTO said Hunt's assets, plus last month's acquisition of Headington Oil Co., prompted it to increase its 2008 production growth target to 28 to 30 percent. XTO rose $1.33, or 2 percent, to $69.05.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 170.3 million shares.
The Russell 2000 index of smaller companies fell 3.99, or 0.54 percent, to 731.26.
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Updated : 2021-05-09 03:52 GMT+08:00