Drop in U.S. energy use drags stock market lower

NEW YORK — A drop in energy stocks dragged the market lower Thursday following a government report that consumers and businesses cut back on their use of oil and gas.

Major stock indexes slid about 1 percent from 13-month highs, including the Dow Jones industrial average, which fell 94 points after six days of gains.

A jump in petroleum supplies last week stirred worries that the falling demand for energy was a sign of more weakness in the economy. The report pushed crude oil down 3 percent, below $77 a barrel.

A gain in the dollar also weighed on commodity prices by making them more expensive for overseas buyers.

The resulting slide in energy shares upended an early advance led by technology stocks, which rose after 3Com Corp. agreed to a $2.7 billion takeover by Hewlett-Packard Co. and as Intel Corp. said it would pay $1.25 billion to Advanced Micro Devices Inc. to settle legal disputes.

The disappointing report on energy usage overshadowed other news about the economy. The Labor Department said new claims for unemployment insurance fell last week to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since early January and better than economists had forecast.

Wal-Mart Stores Inc. reported third-quarter earnings that beat analysts' expectations, though sales at stores open at least a year dropped during the quarter. The nation's biggest retailer said sales at existing stores would range from a drop of 1 percent to a gain of 1 percent in its fourth quarter. Sales at stores open at least a year are an important indicator of a retailer's strength.

The mammoth company is seen as a key indicator of consumer spending trends. Investors have worried for months that consumers are so strained by unemployment and lower home prices that they won't spend more and help propel a recovery in the economy.

Frank Ingarra Jr., co-portfolio manager at Hennessy Funds in Stamford, Conn., said stocks had been due for a pause after steep gains in the past week. The Dow and the S&P 500 index closed at their highest levels since October 2008 on Wednesday.

"There is very light volume so it looks like the market wants to do a little consolidating here," he said.

According to preliminary calculations, the Dow fell 93.79, or 0.9 percent, to 10,197.47. The Dow had been up 519 points, or 5.3 percent, in the prior six days — its longest stretch of gains since late August.

The broader S&P 500 index fell 11.27, or 1 percent, to 1,087.24, and the Nasdaq fell 17.88, or 0.8 percent, to 2,149.02.

The Russell 2000 index of smaller companies fell 12.39, or 2.1 percent, to 580.32.