Stocks slumped Tuesday, as oil prices inched back up from earlier lows and an investigation of the insurance industry pressured managed care stocks, trumping better-than-expected earnings from International Business Machines Corp. and Texas Instruments Inc.
Shares of managed care providers tumbled on newspaper reports that an ongoing probe by the office of New York Attorney General Eliot Spitzer extended to health insurers. Volatile oil prices also prompted investors to sell; although crude retreated for a second session, the market was unnerved by its slow creep back above $53 per barrel.
“Between Spitzer and oil prices, it’s taking away from some of the party that we saw earlier with IBM and Texas Instruments, which has helped the Nasdaq hold it together today,” said Steven Goldman, chief market strategist for Weeden & Co. in Greenwich, Conn.
The Dow Jones industrial average was down 58.70 points, or 0.6 percent, at 9,897.62 by Tuesday’s close, while the broader Standard & Poor’s 500-stock index was off 10.79 points, or 1 percent, at 1,103.23.
The technology-rich Nasdaq composite index fell 13.62 points, or 0.7 percent, to 1,922.90, despite strength among chip stocks on earnings news. The Philadelphia Semiconductor index was one of the market’s few bright spots, adding 1 percent.
Capping a lid on stocks, persistent supply worries and an attack on a key Iraqi pipeline helped oil rebound after steep declines Monday, and although prices stayed in negative range, they did make up some of their losses. Light, sweet crude for November delivery was down 38 cents at $53.29 on the New York Mercantile Exchange. Other commodities were also under pressure, including steel and paper.
In economic news, the Labor Department reported a modest 0.2 percent rise in September for its Consumer Price Index as lower prices for new cars and airfares helped temper a rise in energy and medical care costs. The reading of the government’s most closely watched inflation barometer matched economists’ expectations, but the report raised some worries.
Core prices — which exclude volatile energy and food prices — rose 0.3 percent on higher lodging costs, a greater increase than the 0.2 percent projected by economists. Some saw this as a signal that the run-up in energy costs is starting to take its toll.
“It looks like the price hikes on the commodity side are starting to bleed into consumer prices,” said Jack Ablin, chief investment officer at Harris Private Bank. “I don’t think you can sustain this constant bombardment of energy prices, and higher food prices too, and not have it bleed through to the consumer.”
It was unclear whether the inflation reading would have any impact on the Federal Reserve’s policy on interest rates. The Fed has boosted short-term rates three times this year, and many analysts believe its Nov. 10 meeting will bring a fourth hike. But observers are divided on whether a fifth rate increase is in store for December.
Separately, housing construction fell by 6 percent in September to a seasonally adjusted annual rate of 1.898 million units, the Commerce Department said. The decline, steeper than expected, followed a 1.8 percent rise in housing activity in August, which turned out to be stronger than initially estimated. The news put pressure on housing stocks.
Among stocks being pressured by The Hartford Courant’s report on Spitzer’s insurance investigation, Aetna Inc. slid 12 percent, or $11.57, to $86.17; Cigna Corp. shed 10 percent, or $6.85, to $59.73, and UnitedHealth Group Inc. dropped 9.3 percent, or $6.85, to $66.50.
Among advancers, IBM was up 4 percent, or $3.45, at $89.37, on better than expected third-quarter results. IBM reported a small gain in third-quarter profits and its earnings beat estimates by 3 cents a share.
Also giving hope to tech investors, Texas Instruments advanced 6.9 percent, or $1.46, to $22.55, on solid third-quarter profits due to rising demand for its products in high-end mobile phones and digital light processing systems for big-screen televisions. TI, which makes chips for more than half the world’s mobile phones, reported per-share earnings of 32 cents, topping its own estimates and Wall Street’s forecasts.
Overseas, Japan’s Nikkei average added 0.91 percent. In Europe, France’s CAC-40 rose 1.11 percent, Britain’s FTSE 100 added 0.62 percent and Germany’s DAX surged 1.25 percent.
