While you were sleeping: Chipmakers drag stocks lower

While you were sleeping: Chipmakers drag stocks lower

(BusinessDesk) March 8 - Stocks on Wall Street dropped, led by a decline in chipmakers. Another rise in oil prices also worried investors.

A drop in U.S. semiconductor stocks dragged the Standard & Poor's 500 Index lower after Wells Fargo & Co cut the group to “market weight” from “overweight.”

In mid-day trading, the Dow Jones Industrial Average dropped 0.69%, the S&P 500 declined 0.92% and the Nasdaq Composite Index shed 1.79%.

The escalating chaos in Libya and concern about unrest in Saudi Arabia has underpinned oil prices, which is stoking concern that the increased fuel cost might hamper the economic recovery. Today, brent crude jumped as high as US$118.50 a barrel.

"There is disappointment that we could be dealing with oil over US$100 per barrel for some time," David Lutz, managing director of trading, Stifel Nicolaus Capital Markets in Baltimore, told Reuters.

U.S. President Barack Obama said that NATO was considering military options in response to the situation in Libya. Speaking after talks with visiting Australian Prime Minister Julia Gillard, Obama said the two countries agreed that violence by the Libyan government against its people was unacceptable.

In Europe, the benchmark Stoxx 600 Index fell 0.3%.

Bucking the trend were LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest luxury goods company, and Bulgari SpA on news that LVMH plans to acquire Bulgari for about 3.7 billion euros (US$5.2 billion).

LVMH advanced 2.7% while Bulgari shares soared 59%.

A downgrade of Greece’s credit rating by Moody's Investors Service kept alive concerns about sovereign debt in the euro zone. Moody’s cut the nation’s debt by three notches to B1 from Ba1 and warned it might slash the rating further, drawing protest from the Greek Finance Ministry.

"The likelihood of a default or distressed exchange has risen since its last downgrade of the Greek government debt rating in June 2010," Moody's said in a statement.

In May 2010 Greece signed a 110 billion euro rescue package with the European Union and International Monetary Fund to avoid default in exchange for severe austerity measures.

The euro was steady at US$1.3992. The U.S. dollar slid 0.2% against the yen to 82.13 yen.

Brent crude was up 55 cents to US$116.52 at 1528 GMT. U.S. crude was US$1.04 higher at US$105.46.

Oil traders in New York and London told Reuters that prices had given up some of their earlier gains amid a rumour that Libyan leader Muammar Gaddafi was preparing to leave the country.

"The major risk remains the prospect of the political unrest spreading to the Gulf producing region," Caroline Bain, economist at the Economist Intelligence Unit, told Reuters. "However, even if there is civil unrest in Saudi Arabia, it is not a given that oil production will be affected."

Spot gold climbed to a record US$1,444.40 an ounce, boosted by Greece’s downgrade and the turmoil in Libya.

Gold was up at US$1,437.85 an ounce at 1513 GMT from US$1,431.95 late in New York on Friday.

U.S. gold futures for April delivery rose US$10.1 an ounce to US$1,438.70.

"The geopolitical risk premium is clearly reflected in the gold price," Robin Bhar, an analyst atCredit Agricole, told Reuters. "The violence [has] intensified which does prompt suggestions of civil war in Libya," he said.

(BusinessDesk)

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