Stocks dove Wednesday, with the Dow shedding more than 101 points, as crude prices climbed to a new record, fueled by fears that tropical storms would pinch supply.
The Dow Jones Industrial Average fell 101.12, or 1 percent, to settle at 10,270.68 after rising 68 points Tuesday. The Standard & Poor’s 500 Index was down 10.05, or 0.8 percent, at 1,194.94. The Nasdaq Composite Index lost 10.10, or 0.5 percent, to 2,068.65.
Oil closed above $61 per barrel for the first time as investors worried that Tropical Storm Cindy would slow production in the Gulf of Mexico. Reports of power outages at two Valero Energy Corp. refineries added to investors’ fears. A barrel of light crude settled at $61.28, up $1.69, on the New York Mercantile Exchange.
The spike in crude prices caused investors to look past a report showing strong growth in the service sector of the economy. The index of business activity in the non-manufacturing sector stood at 62.2 last month, up from 58.5 in May, according to the Institute for Supply Management. The index was above the 58.9 analysts were expecting.
Among local movers, shares of PacifiCare Health Systems Inc. gained 6.1 percent to close at $77.09 after surging more than 13 percent on news that the Cypress-based operator of managed healthcare plans agreed to be acquired by rival UnitedHealth Group Inc. for a total consideration of $2.2 billion in cash and 111.6 million shares. PacifiCare shareholders will receive $21.50 in cash and 1.10 UnitedHealth shares for each share held.
Capstone Turbine Corp. rose 16.2 percent to $1.58 after the Chatsworth-based maker of turbines for power generation companies said it won an order from BPC Energy in Russia and signed up Wesco International Inc. as U.S. distributor. Capstone also said that third parties have recently expressed interest in taking over the company. The company’s board has adopted a stockholder rights plan to ensure equal treatment in the event of a takeover attempt.
And Semtech Corp. edged up 2.2 percent to $17.07 after the Camarillo-based semiconductor maker said its board authorized an additional $50 million for the company’s current stock buyback program. The initial $50 million was authorized when the program was established in February 2004.
On the down side, shares of IHOP Corp. sank 4.6 percent to $41.40 after the stock rating of the Glendale-based operator and franchiser of International House of Pancakes restaurants was downgraded to “outperform” from “strong buy” by analyst Bryan C. Elliott at Raymond James.
Elliott also downgraded the sector, saying higher costs and volatile consumer spending could weigh on the group. California Pizza Kitchen Inc. was also cut to “outperform” from “strong buy,” sending the L.A.-based casual dining restaurant chain operator’s stock down 1.4 percent to $26.54.
