Stocks Tank; Oil Pumps Up Energy Sector

Stocks fell as an escalated projection for oil prices and 28-year low in consumer sentiment curbed gains in just about every sector outside of energy.

Reuters and the University of Michigan reported their consumer-sentiment index fell to 59.5 in the first reading for May, down from April's final reading of 62.6. That was the lowest since June 1980. Economists had expected the gauge to come in at 62.

Expectations for the future were the lowest since October 1990.

Housing starts jumped 8.2 percent in April to an annualized rate of 1.032 million units, following a nearly 14-percent drop in March; economists had expected the gauge to slide again. Building permits also rose.

"Finally, some good news on housing," Jack Bouroudjian of Brewer Investment Group told CNBC. "We have been looking and waiting for the effects of these lower rates and … now we're starting to see those real numbers in housing," Bouroudjian said. "I think that's going to play really well with this market."

Hombuilders declined after an earlier boost from the report. Toll Brothers and KB Home both retreated.

The encouraging housing report comes a day after leaders of the U.S. Senate Banking Committee agreed to the underpinnings of a housing-rescue plan that will create a federal backstop for failing loans, Reuters reported.

The plan would create a $300 billion mortgage insurance fund administered by the Federal Housing Administration and a new regulator for Fannie Mae and Freddie Mac , the two largest sources of mortgage finance in the U.S.

Crude oil was trading between $126 and $127 a barrel, after earlier setting a new record above $127 a barrel. Goldman Sachs, the most active brokerage in energy markets, on Friday raised its forecast for oil to hit $141 a barrel in the second half of this year. Goldman rattled the market less than two weeks ago, when it projected oil prices between $150 and $200 a barrel in the next two years.

Crude's recent surge has propelled energy stocks to historic highs. ExxonMobil and Chevron were the top two gainers on the Dow Jones Industrial Average.

Lockheed Martin won a potential $3.6 billion contract to start building a new generation of global positioning satellites that will boost accuracy for worldwide users, the Air Force said Thursday.

And Genentech said on Thursday a trial of Avastin in colon cancer patients who have undergone surgery will be completed earlier than expected due to faster collection of data and a higher-than-planned number of patients with stage III cancer.

Retail stocks declined, but there were a few bright spots from earnings that came in better than expectations.

High-end retailer Nordstrom reported its profit slipped but beat expectations. However, the company lowered its outlook.

Teen retailer Abercrombie & Fitch reported earnings of 69 cents a share, surpassing expectations, and backed its outlook for the second quarter.

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