(Updates to midday, changes byline)
* Oil rebound stirs caution about inflation
* Financials touch 5-year low after Goldman rumors
* Alcoa drags on Dow after broker downgrade
By Cal Mankowski
NEW YORK, June 11 (Reuters) - U.S. stocks fell on
Wednesday after a bigger-than-expected drop in U.S. crude oil
inventories drove oil prices higher, stoking fears about
inflation and the effect on consumers.
Sentiment soured further on fears of more trouble in the
financial sector. Traders said there was talk that Goldman
Sachs <GS.N> , the largest U.S. investment bank by market
value, may have to write off bad loans. A Goldman Sachs
spokesman said the company does not comment on market rumors.
The S&P financial subindex <.GSPF> sank briefly to a
5-year low, while Goldman shares slid 2 percent.
Oil futures jumped nearly 5 percent to more than $137 a
barrel.
Shares of energy-intensive companies, including airlines,
took a beating. Delta Air Lines <DAL.N> was down 6.2 percent
at $5.56 on the New York Stock Exchange, while package
delivery company FedEx Corp <FDX.N> slid almost 3 percent to
$87.50.
Shares of retailers also fell, with Wal-Mart Stores Inc
<WMT.N> down almost 1.5 percent at $58.88.
Crude oil "inventories were taken down more sharply than
expected," said Al Goldman, chief market strategist at
Wachovia Securities in St. Louis. "There have been some wild
and wooly projections on where oil is going and this kind of
fed into it."
Goldman, who believes that the stock market is in the
process of finding a bottom, said that global demand for oil
products is coming down and domestic gasoline consumption has
fallen. But he said that for now, the stock market is "held
captive by the price of oil."
The Dow Jones industrial average <> fell 168.46
points, or 1.37 percent, to 12,121.30. The Standard & Poor's
500 Index <.SPX> declined 17.14 points, or 1.26 percent, to
1,341.30. The Nasdaq Composite Index <> lost 41.55
points, or 1.70 percent, to 2,407.39.
Alcoa Inc <AA.N> was the top drag on the Dow, falling 6.2
percent to $40.07 after JPMorgan cut its rating on the
aluminum producer.
Among financial shares, Goldman Sachs fell 2.1 percent to
$163.78.
Investment bank Lehman Brothers Holdings Inc <LEH.N> lost
6.6 percent to $25.68. The Financial Times reported that
Lehman almost struck a deal with Korean financial institutions
as part of raising $6 billion in capital and may yet arrange
one by the end of the year.[].
A spokesman for Lehman declined to comment.
Technology shares and financial shares were the weakest
sectors in a broad decline.
On Nasdaq, shares of iPod and iPhone maker Apple Inc
<AAPL.O> slid 2.4 percent to $181.20. Apple was the heaviest
weight on the Nasdaq 100 <> index.
Chip maker Intel Corp <INTC.O> was a drag on the S&P 500
and the Nasdaq, falling 2.7 percent to $22.08 in Nasdaq
trading.
International Business Machines Corp <IBM.N> was among the
Dow's biggest decliners. IBM fell 2.1 percent to $123.36 on
the New York Stock Exchange.
A bright spot was U.S. office supplies company Staples
<SPLS.O>, whose shares rose 4.5 percent to $24.20 on the
Nasdaq. Staples won its battle to buy Corporate Express
<CXP.AS> after the Dutch office supplies firm agreed to a
sweetened bid of $2.65 billion.
(Additional reporting by Ellis Mnyandu; Editing by Jan
Paschal)
