Transportation shares fall as oil price climbs

Dow Jones: 12,387.77 (–21.77) SP 500: 1,329.07 (–4.44) Nasdaq: 2,780.41 (–15.73):US STOCKS fell yesterday, preventing the third straight weekly gain for Standard and Poor's 500 Index, as oil's rally above $112 a barrel drove down transportation and industrial companies and investors speculated the federal government may shut for the first time since 1996.

FedEx, which runs the world’s biggest cargo airline, slumped 2.9 per cent.

United Continental Holdings tumbled 5.8 per cent as the NYSE Arca Airlines Index slid to the lowest level since September.

Expedia surged 13 per cent after the biggest online travel agency by revenue said it will split into two separate businesses.

The US dollar fell 1 per cent to $1.4458 against the euro, helping drive up prices of commodities traded in dollars.

“As oil rises, the synchronized trade is to de-risk,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus, which oversees $110 billion in client assets.

“Higher commodities prices raise concern about future inflation and consumption. One should keep a careful eye on companies’ forecasts and on input costs in particular,” he said.

The SP 500 has risen 5.6 per cent in 2011 through yesterday as government stimulus measures and higher-than-estimated profits boosted investors’ optimism.

US stocks fell on Thursday, dragging the Dow average down from an almost three-year high, as another earthquake shook Japan and a dispute over the federal budget threatened to shut down the American government.

Equities also fell as Democratic and Republican leaders in Congress remain divided over a federal budget, hours away from the first US government shutdown in more than 15 years.

Democratic leaders say Republicans are refusing to accept federal funding for Planned Parenthood. Republicans say the dividing issue is the amount of spending cuts.

Commodities rose for a seventh day on optimism about economic recovery and on a weaker dollar. Gold and tin climbed to records.

Oil rose above $112 a barrel in New York for the first time since 2008 and surpassed $126 a barrel in London as a fire burned at Libya’s Sarir field, bolstering concern that unrest in the region will further reduce supply. – (Bloomberg)