Investors fear bankrupt BP
NEW YORK -- The stock market had another late-day slide Wednesday -- this time because of fears that the Gulf of Mexico oil spill will threaten BP's dividend and perhaps land the company in bankruptcy court.
The Dow Jones industrials, up about 125 points late morning, closed down 41. Most selling came in the last hour -- the third time in four days that stocks had a late-day drop.
Investors got a "sell" signal from news reports that raised the possibility of worsening financial fallout from the oil spill.
A group of about 30 U.S. lawmakers sent a letter to BP's Chief Executive Officer Tony Hayward, asking him to halt dividend payments and advertising until the leaking well is capped and the spill is cleaned up.
Investors tend to sell any time a company's dividend appears to be in jeopardy. BP is scheduled to make a $2.63 billion payout June 21.
And Fortune.com quoted an analyst as saying BP could be forced to seek bankruptcy protection within about a month.
The worries about BP were enough to make investors shrug off reassuring words about the economy early in the day from Federal Reserve Chairman Ben Bernanke.
BP fell 15.8 percent, and selling spread to other energy companies. Shares of Anadarko Petroleum Corp. -- a part-owner of the rig that caused the spill -- dropped 18.6 percent.
The slide in energy stocks have halted the market's upward momentum, said Peter Boockvar, equity strategist at Miller Tabak.
"The oil stocks are getting killed. They're widely owned, so anytime you see that kind of activity it makes people nervous," he said.
The Dow's decline yesterday occurred after it climbed 123 points on easing concerns that the economy would fall back into recession. The confidence extended into the first part of trading -- lifting the Dow back above 10,000, after Bernanke said debt problems in Europe might amount only to a "modest" drag on the U.S. economy if the financial markets can halt their slide.
Many traders have been anxious that the Gulf oil spill and spending cuts in Europe could slow the economic recovery. The concerns have pounded U.S. stocks since they set highs so far this year in late April. They are down more than 10 percent since then -- a drop that's known as a "correction."
The Dow fell 40.73, or 0.4 percent, to 9,899.25 after trading as high as 10,065.14. It is down 1,306 points, or 11.7 percent, from its 2010 high of 11,205 reached April 26.
The Standard & Poor's 500 index fell 6.31, or 0.6 percent, to 1,055.69. The Nasdaq composite index fell 11.72, or 0.5 percent, to 2,158.85.
Gold prices retreated after setting a record high a day earlier. Gold fell $15.70 to $1,229.90 an ounce. It rose as high as $1,254.40 an ounce Tuesday.
Crude oil rose $2.39 to $74.38 per barrel on the New York Mercantile Exchange.