US stocks fell yesterday in another late-day roller-coaster ride, dragged lower by BP and other energy shares as the US probe of the oil spill in the Gulf of Mexico deepened.
The late retreat stocks triggered a bid for safe-haven assets, which pushed US government bonds into positive territory, while the euro edged higher boosted by demand for options.
BP stock price plunged 15.8 per cent – shedding $17bn in market capitalisation on the day – as it faced more US government and congressional scrutiny over its handling of the Gulf of Mexico oil spill, the worst in US history.
Earlier Fed chairman Bernanke, in testimony to the US House of Representatives Budget Committee, said the US economic recovery appeared to be on solid footing and that while a double-dip recession “can never be entirely ruled out,” he expected the economy to continue growing.
The Federal Reserve’s Beige Book on regional US economic conditions showed economic improvement across the country from late April to May, yet it said there were worries over the effect of Europe's sovereign debt crisis on the US economy.
“Folks don’t want to go home with any risk. You are seeing a [comeback] of the safety trade,” said Evan Moskovit, head of US fixed income at Sun Capital Advisers in Wellesley, Massachusetts.
The Dow Jones industrial average dropped 40.73 points, or 0.41 per cent, to 9,899.25.
The Standard & Poor’s 500 Index fell 6.31 points, or 0.59 per cent, to 1,055.69.
The Nasdaq Composite Index lost 11.72 points, or 0.54 per cent, to 2,158.85.
BP shares closed at $29.20, their lowest since August 1996, wiping about £50bn ($72bn) off its market capitalisation. BP shares trading in New York fell on growing worries about the costs the energy giant will have to assume because of the spill.
“You hear this unease over solvency and/or a dividend suspension at BP, and I think it's hurting the tone of the market,” said Nick Kalivas, senior equity index analyst at MF Global in Chicago.