(Updates to late morning)
* Drop of $5 in oil's price stings energy companies
* Analyst sees $5 billion write-downs at Merrill
* Bernanke says Fed may extend emergency lending
* Housing sales data shows sharp drop in May
By Ellis Mnyandu
NEW YORK, July 8 (Reuters) - U.S. stocks fell in volatile
trading on Tuesday as a pullback in oil prices hit shares of
energy companies and investors fretted about predictions of
mounting credit losses in the financial services sector.
Investors feared that credit turmoil would hurt economic
growth and profits, a concern that sent global equity markets
lower and pushed the S&P 500 <.SPX> , the broadest major stock
gauge, on course for a bear market, defined as a 20 percent
decline from its high.
Among energy shares, Exxon Mobil Corp <XOM.N> was down more
than 2 percent, Chevron Corp <CVX.N> fell nearly 2 percent and
oil services company Schlumberger <SLB.N> declined about 4
percent.
In the financial sector, shares of Merrill Lynch <MER.N>
declined almost 3 percent to $29.51 after a Wachovia Capital
Markets analyst forecast about $5 billion in second-quarter
write-downs at the No. 3 Wall Street investment bank. The
analyst said he expects Merrill to show a loss in the quarter
and full year. For details, see [].
"Investors are quite nervous. A lot of the worries are
about the banking sector, that there could be another shoe to
drop," said Steve Goldman, market strategist at Weeden & Co in
Greenwich, Connecticut.
The Dow Jones industrial average <> fell 25.41 points,
or 0.23 percent, to 11,206.55. The Standard & Poor's 500 Index
<.SPX> shed 5.94 points, or 0.47 percent, to 1,246.37. The
Nasdaq Composite Index <> declined 6.16 points, or 0.27
percent, to 2,237.16.
Technology shares also fell. Apple Inc <AAPL.O> led losses
on the Nasdaq as a rebounding dollar threatened the U.S. tech
sector's competitive advantage selling abroad.
In one sign of persistent concern about the credit crisis,
Federal Reserve Chairman Ben Bernanke said the central bank may
extend emergency lending for big Wall Street investment banks,
temporarily easing worries about the credit turmoil.
The housing report from an industry group showed a
sharper-than-expected fall in pending sales of previously owned
homes in May.
Aluminum producer Alcoa Inc <AA.N>, which is due to post
its quarterly results after the closing bell, was down 6.2
percent at $31.32 as investors feared higher input costs would
probably hurt profit margins. Alcoa results mark the unofficial
start of Wall Street's quarterly earnings reporting season.
Shares of Exxon Mobil dropped to $85.14 on the New York
Stock Exchange. Chevron dropped to $95.22.
On Nasdaq, shares of iPod and iPhone maker Apple fell to
$174.75.
While the drop in oil prices hit energy shares, it boosted
shares of consumer-oriented companies, including Wal-Mart
Stores Inc <WMT.N>, up nearly 2 percent at $57.99, and those
energy-reliant sectors, such as airlines.
Shares of Delta Air Lines Inc <DAL.N> shot up 6 percent to
$5.17 as U.S. crude dropped $5.19, or 3.6 percent, to $136.26 a
barrel on the New York Mercantile Exchange, spurred a rise in
the dollar and easing of concern about Hurricane Bertha's
chances of hitting Gulf oil production operations.
(Editing by Kenneth Barry)
