Worries about BP send 'sell' signal to markets

NEW YORK - The stock market had another late-day slide, this time because of fears that the gulf oil spill would threaten BP's dividend and perhaps land the company in bankruptcy court.

The Dow Jones industrial average, up about 125 points late Wednesday morning, closed down 41. Most selling came in the last hour, the third time in four days that stocks had a late-day drop.

Investors got a "sell" signal from news reports that raised the possibility of worsening financial fallout from the oil spill. A group of about 30 U.S. lawmakers sent a letter to BP CEO Tony Hayward asking him to halt dividend payments and advertising until the leaking well is capped and the spill is cleaned up. Investors tend to sell any time a company's dividend appears to be in jeopardy. BP is scheduled to make a $2.63 billion payout June 21.

And Fortune.com quoted an analyst as saying BP could be forced to seek bankruptcy protection within about a month.

The worries about BP were enough to make investors shrug off reassuring words about the economy early in the day from Federal Reserve Chairman Ben S. Bernanke. BP fell 15.8 percent, and selling spread to other energy companies. Anadarko Petroleum Corp., a part-owner of the rig that caused the spill, dropped 18.6 percent.

The slide in energy stocks halted the market's upward momentum, said Peter Boockvar, equity strategist at Miller Tabak.

"The oil stocks are getting killed," Boockvar said. "They're widely owned, so any time you see that kind of activity it makes people nervous."

The drop came a day after the Dow climbed 123 points on easing concerns that the economy would fall back into recession. The Dow had risen back above 10,000 earlier Wednesday, after Bernanke said debt problems in Europe might only amount to a "modest" drag on the U.S. economy if the financial markets can halt their slide.

He told the House Budget Committee that the economy was getting better but that job growth was likely to remain weak. The enthusiasm over his testimony faded after speculation arose that BP might not be able to recover from the oil spill.

The Dow fell 40.73, or 0.4 percent, to 9,899.25 after trading as high as 10,065.14.

The Standard & Poor's 500 index fell 6.31, or 0.6 percent, to 1,055.69, while the Nasdaq composite index fell 11.72, or 0.5 percent, to 2,158.85.

Crude oil rose $2.37 to $74.36 per barrel on the New York Mercantile Exchange.

The drop in stocks accelerated after the euro dipped below $1.20, said Michael O'Rourke, chief market strategist at the institutional broker dealer BTIG L.L.C. in New York.

The 16-nation currency has been under pressure on worries about Europe's growth prospects and the economic effects of deep cuts in government spending there. Investors are worried that could undercut U.S. economic recovery.

The market's slump overshadowed a Fed report that the U.S. economy strengthened in all 12 of the central bank's regions. That hasn't happened since before the recession began in December 2007.