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US stocks drop as Iraq violence worsens

Wall Street stocks on Thursday fell on escalating violence in Iraq that pushed US oil prices to their highest level in nearly nine months.

NEW YORK: Wall Street stocks on Thursday fell on escalating violence in Iraq that pushed US oil prices to their highest level in nearly nine months.

The Dow Jones Industrial Average fell 109.69 points (0.65 per cent) to 16,734.19.

The broad-based S&P 500 lost 13.78 points (0.71 per cent) at 1,930.11, while the tech-rich Nasdaq Composite Index sank 34.30 points (0.79 per cent) to 4,297.63.

Jihadists pushed toward Baghdad on Thursday after capturing a town to the north, as US President Barack Obama said his national security team "is looking at all the options."

With the militants approaching the capital, forces from Iraq's autonomous Kurdish region took control of disputed northern oil hub of Kirkuk to protect it from jihadist attack, officials said.

US oil prices rose more than two per cent to $106.53 a barrel, the highest level since September 18, 2013.

"It's all about the Iraq situation," Peter Cardillo, chief market economist at Rockwell Global Capital, said of the drop in US equities.

A sustained rise in oil prices "would bite into economic activity and into consumer spending and that would obviously not be good for our economy," he said.

Several leading energy companies rose with the surge in oil prices, including Dow component Chevron (+0.7 per cent), ConocoPhillips (+1.1 per cent) and Marathon Oil (+1.7 per cent).

But the rise in oil prices weighed on airlines, which could be forced to pay higher jet fuel prices. American Airlines fell 4.9 per cent, Delta Air Lines dropped 5.4 per cent and United Continental lost 5.9 per cent.

Amazon launched a streaming music service as part of its "Prime" subscription-based service. Amazon said the service was an added benefit for subscribers, although the catalog of more than one million songs is far smaller than offerings from some rival services. Shares fell 2.8 per cent.

Struggling yoga apparel maker Lululemon Athletica sank 15.7 per cent after forecasting earnings for the upcoming quarter of 28-30 cents per share, below the 36 cents projected by analysts. The company's full-year outlook also disappointed.

Bond prices rose. The yield on the 10-year US Treasury fell to 2.59 per cent from 2.64 per cent on Wednesday, while the 30-year declined to 3.41 per cent from 3.47 per cent. Bond prices and yields move inversely.

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