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NEW YORK : US stocks slumped on Monday as oil prices soared on traders' fears that tropical storm Rita could threaten crude production in the Gulf of Mexico.
The Dow Jones Industrial Average of blue chips closed down 84.31 points (0.79 percent) at 10,567.63 while the Nasdaq tech-heavy index ended lower 15.09 points (0.70 percent) at 2,145.26.
The broad-market Standard and Poor's 500 index dropped 6.89 points (0.56 percent) to close at 1,231.02.
Stocks tumbled as oil prices surged on fears another storm could sweep across the Gulf of Mexico, potentially affecting the gulf's oil production even as energy companies vie to repair recent damage wrought by Hurricane Katrina.
New York's main contract, light sweet crude for delivery in October, closed up a sharp 4.39 dollars at 67.39 dollars per barrel. The benchmark contract had climbed as high as 67.50 dollars in earlier trading.
"The higher crude oil prices led to concerns about the impact of inflation on discretionary spending," said Robert Pavlik, a portfolio manager at Oaktree Asset Management, adding this had dampened market sentiment.
Wall Street was also overshadowed by uncertainty about the Federal Reserve's monetary-policy decision due Tuesday afternoon.
"All eyes are on the Fed as the FOMC (Federal Open Market Committee) is slated to meet on short-term interest rates on Tuesday," said Marc Pado, a US market strategist at Cantor Fitzgerald.
Economists are torn over whether the Fed will raise interest rates for the 11th time or not.
The headline US rate now stands at 3.5 percent. If the Fed does move, analysts predict a quarter-point increase to 3.75 percent.
However, economists said the central bank faces a tricky decision. It could move to stamp out inflation sparked by yet another possible spike in oil prices on the back of Hurricane Katrina, but FOMC members might be worrying about the extra hit to the economy caused by a rate hike.
European markets posted a mixed performance on Monday.
Powered by oil issues, the FTSE-100 index here rose 0.40 percent to 5,429.7, its best performance since August 28, 2001.
In Paris the CAC 40 shed 0.08 percent to close at 4,505.68 while in Frankfurt the DAX plunged 1.21 percent to 4,926.13.
The Euro Stoxx 50 index of leading eurozone shares gave up 0.31 percent to end the day at 3,356.28.
US oil stocks posted gains on the upswing in oil prices.
Oil giant ExxonMobil Corp closed up 93 cents, or 1.46 percent, at 64.63 dollars while rival Chevron Corp closed higher 93 cents, or 1.47 percent, at 64.31 dollars.
Hewlett Packard closed up 54 cents, or 1.91 percent, at 28.88 dollars after the PC maker announced it planned to acquire Peregrine Systems Inc for 425 million dollars in cash.
Meanwhile former Tyco International chief Dennis Kozlowski and his top lieutenant Mark Swartz were each sentenced to up to 25 years in prison on Monday for looting the company of hundreds of millions of dollars.
The two men, who stood accused of using the conglomerate as a personal piggy bank to purchase real estate and yachts and to pay for lavish parties, will serve a minimum of eight years and four months in jail, at which time they will become eligible for parole.
Bonds swung higher. The yield on the 10-year US Treasury bond fell to 4.247 percent from 4.262 percent Friday and that on the 30-year bond dropped to 4.543 percent from 4.555 percent. Bond yields and prices move in opposite directions.
- AFP /ct
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