Libya uprising sparks sharp stock sell-off

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http://money.cnn.com/2011/02/22/markets/markets_newyork/

Libya uprising sparks sharp stock sell-off

By Hibah Yousuf, staff reporterFebruary 22, 2011: 12:39 PM ET

NEW YORK (CNNMoney) -- Libya's escalating political crisis sparked a sell-off in

U.S. stocks Tuesday, with all three major indexes at session lows in midsession,

as oil prices continued to skyrocket and overseas markets faltered.

Ongoing weakness in the housing market also added pressure after a report that

national home prices fell 4.1% during the fourth quarter of 2010.

The Dow industrial average (INDU) lost 116 points, or 0.9%. Wal-Mart (WMT,

Fortune 500) was one of the worst performers on the Dow, with shares down more

than 3% after the retailer reported disappointing U.S. sales figures.

The S & P 500 (SPX) was down 19 points, or 1.4%, and the tech-heavy Nasdaq (COMP)

shed 54 points, or 1.9%.

The CBOE volatility index (VIX), which is known as the VIX and is used to gauge

fear in the market, jumped more than 20% Tuesday.

Market strategists seem to agree that the market is due for a short-term

pullback given the steady rise since late August, and the spike in oil prices

may be the catalyst to trigger that retreat.

Libya and oil: Oil prices spiked 6% Tuesday to $94.80 a barrel as the chaos in

Libya entered an eighth day. Earlier, oil prices came within $2 of $100 a

barrel.

The turmoil in North Africa and the Middle East has roiled world financial

markets, with stocks sinking across Asia and markets in Europe under pressure.

" We're facing a fear of the unknown, " said Sheldon, chief market

strategist at RDM Financial Group. " Investors don't know how serious the

political upheaval will become, or how high oil prices may end up going over the

next several weeks. "

Why the oil market is nervous

The political strife in Libya is part of a chain of uprisings that started this

year in Tunisia and spread to Egypt, where protesters deposed Hosni Mubarak

earlier this month.

Until Libya, the movement in the Middle East had not impacted a major exporter

of crude. Now, investors are concerned that the unrest could disrupt the flow of

oil from other key producing countries.

World markets: European stocks fell on the ongoing Libya concerns. Britain's

FTSE 100 fell 0.3%, France's CAC 40 dropped 1.2% and the DAX in Germany lost

0.1%.

Asian markets ended sharply lower. The Shanghai Composite plunged 2.6%, the Hang

Seng in Hong Kong tumbled 2.1% and Japan's Nikkei sank 1.8%.

Late Monday, Moody's changed its outlook on Japan's bond rating to negative. The

credit ratings agency cited difficulties facing the government and dimming

prospects to stem the country's rising debt burden, according to reports.

Economy: Consumer confidence, as measured by the Conference Board's monthly

index, rose to a 3-year high in February.

Companies: Shares of Mentor Graphics (MENT) jumped 10% after billionaire

investor Carl Icahn offered to buy the company for $17 per share, according to a

letter obtained by the Wall Street Journal. The stock closed Friday at $14.52

per share.

Chesapeake Energy (CHK, Fortune 500) was up 6% after Australian resources

company BHP Billiton (BHP) announced plans to buy Chesapeake's shale assets in

Arkansas for $4.75 billion.

Shares of & Noble (BKS, Fortune 500) fell almost 10% after the bookstore

suspended its quarterly dividend of 25 cents per share. & Noble also said

it has decided not to issue sales or earnings guidance for the remainder of the

year due to the unknown impact of Borders Group's bankruptcy filing.

Currencies and Bonds: The dollar rose against the euro, the British pound and

the Japanese yen.

The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to

3.59% from 3.62% late Friday.

-- The CNN Wire contributed to this report.