U.S. stocks closed lower Wednesday after UPS projected an earnings shortfall and oil prices surged.
Crude oil jumped above $112 a barrel before settling at $110.87 -- a record close -- on the New York Mercantile Exchange after U.S. government data showed a surprise dropin crude stockpiles last week.
Shares of United Parcel Service fell 3.7 percent after the shipping company lowered its outlookbecause of lower volume and higher fuel costs. The gloomy forecast spurred concerns that the U.S. economy will continue to suffer, since UPS's business in large part relies on the sales of other businesses.
"UPS had an earnings warnings and that could portend more lowering of earnings guidance," Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Ill., told Reuters.
"Companies are making comments about what the rest of the year is going to look like, and that's what the market is going to be focusing on in the short term," Cherukuri said.
General Motors was the biggest decliner on the Dow, followed by American Express and AIG .
Morgan Stanley shed 2.6 percent, dragging on the financial sector, after the brokerage said that more of its assets became illiquid or hard to value during the first quarter.
Merrill Lynch is likely to write down another $6 billion to $6.5 billion with its first-quarter results, senior executives at the company told CNBC. This latest round of writedowns is due to bad commercial real-estate debt and other loans. Merrill is scheduled to report earnings on April 17.
Citigroup, the largest U.S. bank, was among the few advancers in the financial sector after the company said it is close to a deal to sell $12 billionin leveraged loans and bonds.
The Citi announcement provided at least some assurance that companies are taking proactive measures to shore up their balance sheets. The deal also involves private equity firms Apollo Group, Blackstone Group and TPG.
Circuit City dropped 1.8 percent after the electronics retailer surprised the market, unexpectedly posting a profit, when analysts were expecting a quarterly loss.
Bed, Bath & Beyond lost 4.7 percent. After the closing bell, the retail chain reported a 16 percent decline in profit as the housing slump affected demand for home furnishings. Net income fell to $172.9 million, or 66 cents a share, from $205.8 million, or 72 cents a share, a year ago.
Retailers overall took a beating as higher oil prices rekindled concerns about consumer spending. Among notable decliners were Talbot's , Macy's and J.C. Penney .
Investors also weighed news from the Federal Reserve, which confirmed that it was contemplating additional liquidity measures if its current recipe of aggressive rate cuts, bond auctions and the opening of the discount window fail to generate more cash-flow in the open market.
In the battle for your thumbs, American depositary shares of BlackBerry maker Research In Motion fell after Needham started coverage of the stock with a "hold" rating. Apple also skidded; the iPhone maker received its only "underperform" rating this week from Morgan Keegan.
Elsewhere on the tech battlefield, the clash between Microsoft and Yahoo got a little more interesting amid news that Yahoo is in talks to carry Web-search advertising from Google as part of a broader outsourcing deal. Earlier, it emerged that Legg Mason -- a major shareholder in the portal company -- may be ready to back Yahoo's effort to stay independent if Microsoft lowers its buyout offer, according to the Wall Street Journal.
Boeing announced that it was delaying its 787 Dreamliner for the third time, but the stock, which jumped 4.8 percent, was the biggest gainer on the Dow as traders took it as an encouraging sign that the plane maker was finally delivering a realistic timetable on production.
Shares of American Airlines parent AMR skidded 11 percent after the airline canceled more than 1,000 flights Wednesday for safety checks and said it will hire an outside company to review government-safety requirements.
THURSDAY: Retailers' same-store sales reports; weekly jobless claims; international trade; Bernanke speaks about President's Working Group; U.S. budget; Earnings from Pier 1, Rite Aid, Genentech
FRIDAY: Import prices; consumer sentiment; GE earnings; G7 finance chiefs meet in Washington
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