Dow falls nearly 154; oil tops $108

By MSN Money with wire reports

Stocks sank today as oil's surge above $108 a barrel and more worrisome signs for the financial sector led investors to extend last week's losses.

The Dow Jones Industrial Average fell nearly 154 points, 1.29%, to 11,740 -- bringing its three-day loss to nearly 515 points.

The Standard & Poor's 500 Index fell 20 points, or 1.55%, to 1,273.37, while the Nasdaq Composite Index fell 43.15, or 1.95%, to 2,169.34.

Wall Street had no bleak economic data to contend with today but instead faced a steady drumbeat of negative news on companies exposed to mortgages.

Blackstone Group (BX, news, msgs) posted a quarterly loss as the private-equity company booked a write-down related to the tough credit climate and a big stake in a bond insurer. Its shares rose 42 cents, or 2.9%, to $15.

Meanwhile, mortgage lenders dropped after Thornburg Mortgage (TMA, news, msgs) was downgraded by a Jefferies & Co. analyst and Countrywide Financial (CFC, news, msgs) was reported to be under investigation by the government for securities fraud.

Thornburg sank $1.08, or 60%, to 71 cents, while Countrywide fell 71 cents, or 14%, to $4.36.

Then, Bear Stearns (BSC, news, msgs)dropped as Moody's Investors Service downgraded a batch of Bear securities backed by Alt-A mortgages, which are home loans given to people lacking proof of income or with minor credit problems.

Declining issues outnumbered advancers by about 5-to-1 on the New York Stock Exchange, where volume came to 1.61 billion shares compared with 1.70 billion shares traded Friday.

The slew of downbeat financial news overshadowed a strong February sales report from McDonald's (MCD, news, msgs) and led restless investors to proceed cautiously ahead of big economic reports later in the week: Thursday's report on retail sales and Friday's report on consumer prices. Those two readings will give Wall Street a better idea of how much the average American is struggling with falling home values and rising costs, and how aggressively the Federal Reserve may act when it meets next week.

"The next three days, there aren't any set, big, market-moving reports," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "The economic data Thursday and Friday is going to be the last bit of news, the last showing, before seeing what the Fed will do on the 18th."

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Government bond prices jumped today as stocks weakened. The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.46% from 3.54% late Friday.

Investors appeared to shrug off an upbeat report from the Commerce Department that said U.S. wholesale inventories rose in January by 0.8%, more than expected, and that sales at U.S. wholesalers rose 2.7%, their widest jump since March 2004.

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Recent record-breaking surges in commodities prices have worried many investors about whether the Federal Reserve might hesitate to lower key rates by as much as they want -- at least a half percentage point. Over the past few months, policymakers have cited the staggering economy as a greater risk than inflation.

Today, crude oil soared to finish at a record $2.75 to $107.90 a barrel on the New York Mercantile Exchange after setting a trading record of $108.21 during the session.

Dollar continues to slide

The U.S. dollar fell again against the euro as traders banked on the Fed to lower rates next week.

When the Fed lowers interest rates, the dollar generally weakens because assets that are denominated in dollars produce lower yields.

The dollar fell to $1.5350 against the euro after hitting record lows last week when it hit $1.5459 against the European currency -- the weakest level since 1999, when the euro debuted.

The dollar also fell against the Japanese yen, trading at 102.25 yen in today's session.

Even if rising commodities costs don't restrain the Fed from lowering rates further, the market remains unsure that rate cuts will be enough to keep the sagging economy out of recession. Of particular concern is the job market: The Labor Department said Friday that the economy lost 63,000 jobs last month.

Early today, JPMorgan analysts slashed their year-end target for the S&P 500 Index and earnings for S&P 500 companies, after the bank's chief economist said he believes a recession began in January.

McDonald's profit shining

Things are still golden at McDonald's.

The fast-food chain (and Dow component) reported a 12% increase in February global same-store sales, thanks to strong coffee sales in the U.S. and chicken-sandwich sales in Europe.

McDonald's said that sales at stores open at least one year rose 8.3% in the U.S., while sales increased 15% in Europe and 11% in Asia, the Middle East and Africa.

February results were boosted by the extra day because of the leap year; analysts had expected U.S. sales excluding that day to rise 1% to 2% last month.

Shares of McDonald's rose $1.53, or 2.9%, to $53.80.

Lehman cuts jobs

Lehman Bros. (LEH, news, msgs) is the latest financial-services company to announce layoffs stemming from the mortgage meltdown and credit crunch.

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CNBC reported that Lehman will cut 5% of its work force, across all of its businesses.

Shares of Lehman fell $3.38, or 7.3%, to $42.98.

More pain at the pump

Consumers may be feeling more pressure this week, as gasoline prices rose to a record.

The price of self-serve regular gasoline rose 9 cents over the past two weeks to a record national average of $3.20 a gallon, according to the Lundberg Survey.

The most expensive gas was in San Francisco, with prices at $3.58 a gallon; the cheapest was in Cheyenne, Wyo., where drivers could fill up for $2.99 a gallon.

"We will probably see 20 or 30 cents more at the pump very soon, possibly within a month," oil industry analyst Trilby Lundberg told Bloomberg News on Sunday. "This is all if crude oil prices don't slide substantially, and it doesn't seem likely that they will."

Last May's record of $3.18 a gallon is still the highest when adjusted for inflation, Lundberg said.