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Stocks Plunge on Oil, Consumer Spending Data (las acciones en Wall St. se hunden en medio del petróleo)

U.S. stocks dropped sharply this morning as a spike in oil prices, new data on consumer spending and weak reports on corporate performance soured investors just a day after a Federal Reserve Board interest rate cut had buoyed markets.

The Dow Jones industrial average was down around 200 points after the first hour of trading, a decline of 1.4 percent. Losses had been as steep as 250 points. The Nasdaq and the Standard & Poor’s 500 index suffered proportionate declines.

Undercutting confidence: an overnight spike in the price of oil triggered by a report that U.S. petroleum reserves had fallen for the second week in a row. The price for light, sweet crude, topped $96 a barrel in overnight trading, as investors surveyed data from the U.S. Energy Information Administration showing that U.S. oil supplies had fallen by 3.9 million barrels last week.

Prices began receding when trading opened this morning on the New York Mercantile Exchange.

But the negative mood found plenty of reinforcement.

New Commerce Department data showed that consumer spending — a mainstay of the U.S. economy — grew 0.3 percent in September, slower than expected.

In addition, oil giant Exxon Mobil Corp. reported lower-than-expected profits. The company earned $9.4 billion between July and October, compared to $10.4 billion in the same period a year ago. While a substantial amount of money, the company reported that its profit margin had been trimmed by higher crude oil costs that had not yet been translated into higher prices for gasoline and other products.

Financial stocks were also battered after analysts for CIBC World Markets downgraded the outlook for financial giant Citigroup and suggested the company may need to sell assets to raise cash. Shares were down around 6.5 percent in early trading.

Topping it off, an index of the U.S. manufacturing industry showed that activity at U.S. plants and factories slowed in October.

The downturn on Wall Street followed a much-anticipated quarter-point cut in interest rates announced by the Federal Reserve yesterday, which helped push the Dow up 137 points.

The short-lived rally reemphasized how volatile markets remain, analysts said, with financial companies still processing the degree to which problems in the mortgage industry and credit markets will hurt their bottom line, oil and commodity prices raising inflation concerns, and an anticipation that U.S. economic growth will slow at the end of the year.

A report on the gross domestic product yesterday estimated that the U.S. economy maintained its momentum in the third quarter of the year, growing at a faster-than-expected 3.9 percent annualized rate.

That estimate, however, was based on a level of consumer spending that appears to be slowing, said Nigel Gault, chief U.S. economist with the Global Insight consulting firm.

Gault said he expected that a consumer pullback “will slow overall GDP growth to less than two percent” as the year ends.

“It was consumer spending and foreign economic growth that largely fueled U.S. economic activity this year,” said Bernard Baumohl, managing director of the Economic Outlook Group. “If Americans start to cut back on spending and foreign economic growth slows before the housing sector has chance to recover, then this expansion could well be in jeopardy.”

Art Hogan, chief market analyst, at Jefferies & Co., said that in addition to oil prices and corporate news, the day after a Fed move on interest rates can often by turbulent.

“Often times, the day after is a choppy ride because the full extent of the news settles in on us,” he said. “We were very excited yesterday about the fact that the Fed cut. That’s what we wanted and expected. We celebrated that. But as we sort of wake up today and say, ‘Wait a minute, they took the punch bowl away’ . . . that takes away the guarantee that we had in this market that they’re going to continue to cut” interest rates again.

“Layer on top of that the fact that several large corporations like Citi were downgraded, Exxon Mobil had profit margin issues, Merrill Lynch continuing to look for someone to run the company, the tone of corporate news is more negative than positive today. Coupled with all of that, oil continues to press toward $100. At some point, we have to wake up and realize that that’s not good for corporate earnings.”

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