Stocks Stumble as Oil Slides

• By PETER A. MCKAY

A slump in the energy sector and worries about the upcoming earnings season weighed on stocks Monday morning.

The Dow Jones Industrial Average was off about 60 points at 8220.28 at 10:56 a.m. Its energy components, Exxon Mobil and Chevron, fell around 2% each as oil prices plummeted.

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The commodity put in solid gains along with the stock market, helped by an influx of speculative bets by traders newly willing to take on risk. But in recent sessions, it has been hurt by worries about demand weakness due to the global recession, which now seems likely to last longer than many traders expected.

Crude futures were recently down $2.54 to $64.19 a barrel in New York, leading a broad decline in raw materials. The Dow Jones-UBS Commodity Index was off 2.9%.

Blue-chip aluminum maker Alcoa fell 7.2%, hurt by both the weakness in commodity prices and investors' shifting focus to the second-quarter earnings season. Alcoa will announce its results after Wednesday's close, marking the symbolic start to a reporting season that many investors are looking forward to with increasing dread.

For much of the year, the consensus on Wall Street was that the global economy would begin a rebound in the second half of the year. But now that the second half is here, there is little evidence of such a comeback, and executives seem unlikely to provide much solace in the forecasts that accompany their companies' second-quarter financial statements.

One relative bright spot, however, may come from the relatively low-bar set by the year-ago period as a comparison to the forthcoming numbers. Since the U.S. economy has now been in recession for more than a year and a half, it's getting easier for companies to beat analysts' earnings expectations with each passing quarter, say veteran traders and analysts.

"There is an opportunity here for the season to come out on a positive note," said Richard Sichel, chief investment officer at the poortfolio-management firm Philadelphia Trust Co.

He added: "Companies have dramatically cut their expenses, so bottom lines might be better than expected. We probably still won't see top-line revenue growth, which would be nice. But for now, we'll take bottom-line growth if we can get it."

In recent action, the S&P 500 was off 0.9%, hurt by declines in ever sector except consumer staples, a traditional haven that managed a 0.7% rise. The Nasdaq Composite Index was off 1.3%.

In economic news, the Institute for Supply Management said its non-manufacturing index, a measure of U.S. service-sector activity, rose to 47.0 in June, up from 44.0 in May. The latest reading was better than analysts expected, signalling a slowing contraction in the service sector.

The dollar stuck to narrow ranges against major counterparts, losing ground to the yen but edging higher against the euro ahead of this week's Group of Eight meeting.

Among stocks to watch, LDK Solar shares sank more than 5% after the solar-power company boosted its wafer shipment forecast for the second quarter but issued a revenue view below Wall Street estimates.

Most Asian markets ended lower Monday, with oil and mining shares tumbling on the drop in commodity prices. Tokyo's Nikkei slid 1.4% and Hong Kong's Hang Seng Index fell 1.2%. European shares also sank as commodities-linked stocks declined.

Treasury prices were mixed. The two-year note gained 3/32 to yield 0.941%.