U.S. Stocks Fall As Oil Rises, Financials Woes Return

NEW YORK (MarketWatch) -- U.S. stocks fell early Monday morning, as rising crude oil prices fueled uncertainty about the economy, while worries about ailing financials were rekindled by several media reports.

The Dow Jones Industrial Average fell 43 points, or 0.5%, to 11,605 in early action, with 26 of its 30 components falling. The benchmark index was pulled lower by General Motors Corp. , AIG , and Hewlett Packard .

Shares of Exxon Mobil Corp. rose 0.7%.

Crude-oil prices moved higher amid worries that Tropical Storm Fay could reach installations in the Gulf of Mexico. The September-dated light crude contract tacked on 70 cents to $114.46 a barrel, having peaked at $115.35.

The U.S. dollar was broadly steady after strong gains in the last couple of weeks and ahead of the latest data on housing, due later in the session, and inflation data due Tuesday.

Financial shares gave up some of their strong gains from Friday. Lehman Brothers lost 4% after The Wall Street Journal said it could lose $1.8 billion during the quarter.

Separately, newsweekly Barron's said it's growing more likely that the U.S. government will recapitalize Fannie Mae and Freddie Mac , wiping out investors.

Both Fannie and Freddie lost over 10%.

Also in the financial sector, Mitsubishi UFJ Financial said it has sweetened a bid to acquired the 34.6% stake it doesn't hold in UnionBanCal Corp. to $3.5 billion from $3.0 billion and that the California-based lender has accepted it.

U.S. stocks had ended mostly higher Friday as bond insurers Ambac Financial Group and MBIA Inc. had their credit ratings affirmed and as crude-oil futures continued their decline.

S&P, Nasdaq push lower

The S&P 500 index lost 6 points to 1,291, while the Nasdaq Composite dipped 15 points to 2,437.

While the financial sector led the way down on the S&P 500, with the sector losing 2%, energy and materials both advanced 0.5%, as most commodity prices rose.

Mining giant BHP Billiton said Monday it earned over $15 billion in the year ending June 30 and that the impact of weakness from developed markets has been "minimal." Net profit for the period climbed 15% to $15.39 billion.

Shares in the group rose 1.5%, with other mining stocks also climbing.

In political news, Pakistan's President Pervez Musharraf said Monday that he will step down as the nation's leader amid a growing threat of impeachment.

Shares in Hershey Co. fell 8% after the group lowered its 2008 earnings outlook late Friday and said it would raise wholesale prices by around 11% to offset higher costs.

Among other companies in focus, Lowe's reported a 4.5% drop in its earnings per share to 64 cents but still topped the consensus forecast of 56 cents, with sales also beating expectations.

By Nick Godt