Major Stock Benchmarks Hit '04 Lows

NEW YORK, May 17 -- Stock prices plunged at the opening bell on Monday after a car bomb attack killed the head of the Iraqi Governing Council, raising questions about the planned June 30 transfer of limited authority from coalition forces to local officials.

Prices steadied by mid-morning as bargain hunters emerged and investors tried to decipher political and economic events that had pulled down markets across Asia and Europe, but never really recovered. All the major U.S. benchmarks closed at their low points for the year.

The Dow Jones industrial average dropped 105.96, or 1.1 percent, to 9906.91. The blue-chip benchmark is now down nearly 8 percent since hitting its 2004 high of 10,737.70 on Feb. 11.

The Standard & Poor's 500-stock index fell 11.60 points, or 1.1 percent, to 1084.10. The Nasdaq composite index slid 27.61 points, or 1.4 percent, to 1876.64.

Selling began on Monday in the Asia-Pacific region as continued high oil prices threatened to increase inflation and drive down growth in energy-hungry nations such as China. Oil closed at a new high of $41.55 a barrel on the New York Mercantile Exchange.

Japanese stocks also suffered after one of the nation's largest banks said it would report large losses stemming from bad loans. Tokyo's Nikkei 225 stock average sank more than 3 percent.

The car bomb attack in Baghdad helped spur more selling that spread across Europe, where all the major indices fell about 1 percent, and finally to the United States.

"Global markets are coping with two broad sets of concerns," said Stuart Schweitzer, global asset strategist at J.P. Morgan Fleming Investment Management. "One is the rise in oil prices and the related difficult situation in the Middle East, upon which the world is dependent for so much of its oil." The second concern, Schweitzer said, is that China's booming economy could seriously falter if banks wind up with bad loans to businesses that expanded too far too fast. That could cause ripple effect across the region, particularly in Japan, which is counting on rising demand for its products in China.

U.S. investors continue to struggle with negative headlines coming from Iraq as well as high oil prices, inflation fears and uncertainty over the timing and pace of interest rate increase by the Federal Reserve.

Philip S. Dow, director of equity strategy at RBC Dain Rauscher in Minneapolis, said the attack in Baghdad raised fears about the ability of terrorists to mount successful strikes on oil production facilities in the future, possibly diminishing supply and driving the price of crude even higher. "Oil is a very emotional issue right now tied directly to unstable conditions in the Middle East," he said.