MARKET SNAPSHOT: U.S. Stocks Fall As India Hike, Oil Strikes Nerves

By Donna Kardos Yesalavich

A retreat in energy stocks led to the rally in the broader U.S. market stalling Friday, as it appeared Wall Street would be stymied in its attempt to set the longest winning streak in more than 13 years.

The energy sector was the weakest category in a broad-based selloff as oil prices retreated near $80 a barrel. Worries about key overseas economies also weighed on the market, which many said was overdue for a pause after a solid run lately.

The Dow Jones Industrial Average (DJI) recently traded 77 points lower, off 0.7%, at 10,702, on pace to snap an eight-day winning streak. The run higher is the longest for the Dow since late August, while a nine-day gain, if the Dow could somehow manage a late-day rebound, would represent the blue chips' longest rally since November 1996.

Lower energy prices fueled by an uptick in the dollar has made that rosy outcome seem less and less likely as the session has played out. Oil futures were recently off $2.07 at $80.13 a barrel, after retreating near $79 a barrel earlier in the New York Mercantile Exchange session.

The S&P 500 (SPX) was recently off 0.7%, led by a 1.3% decline in its energy sector. Baker Hughes (BHI) slid nearly 4%, whole Consol Energy (CNX) and Massey Energy (MEE) were off about 2% each. Dow components Exxon Mobil (XOM) and Chevron (CVX) were down about 1% each.

"The commodities, like other risky assets, are taking a little bit of a breather," said Russ Koesterich, managing director of BlackRock's scientific active equity business. But he said it was encouraging that both stocks and raw materials were not declining even more.

"The market has had a big run-up, it's continuing to defy some of the pessimists and this happened on a bunch of factors: earnings coming in better than expected, economic data more or less in the sweet spot of the continuing recovery, and news this week that inflation is not a threat," Koesterich said, referring to a drop in producer prices, flat consumer prices, and the Federal Reserve's vow to keep U.S. interest rates near zero. "This is helping to keep a floor under stocks."

The U.S. Dollar Index (DXY) rose about 0.6%, helped by safe-haven bets due to confusion over possible financial aid for Greece. The market was also surprised by the Reserve Bank of India's increase in its key lending rate to 5% and in its borrowing rate to 3.5%.

"People are worried we might see the same thing out of China when we come in Monday morning," said Nick Kalivas, vice president of MF Global. "The fact that [India's central bank] did it and when they did it is creating some worries we could see some concerted rate hikes."

Indexes tracking higher-risk corners of the stock market fared worse than the Dow and S&P. The Nasdaq Composite Index (RIXF) was off 0.9%, while the Russell 2000 fell 1.4%.

Among stocks in the spotlight, blue chip Boeing (BA) rose 0.9% after announcing plans to increase production of its 777 and 747 aircraft earlier than anticipated amid increasing demand.

Trading sharply lower, shares of Palm (PALM) plunged 25%. The company reported a narrower quarterly loss but warned of significantly lower revenue in the current quarter amid disappointing sales of its latest smartphones.

Merck (MRK) slipped 1.1% after the Food and Drug Administration warned about the increased risk of muscle injury for patients taking an 80-milligram dose of its cholesterol drug Zocor.

Trading volume was higher, with about 3.2 billion shares having changed hands in New York Stock Exchange Composite volume recently, compared with the recent daily average of about 4.8 billion. The increase came on so-called quadruple witching day, when contracts for stock-index futures, stock-index options, stock options and single-stock futures expire. Quadruple witching tends to increase volume and volatility.

Treasurys were mixed, with the two-year note (UST2YR) down 1/32 to yield 0.973% and the 10-year note (UST10Y) up 4/32 to yield 3.663%.