Uneasy investors sold stocks moderately lower yesterday after US and British authorities announced they had disrupted a terror plot that would have destroyed numerous commercial airliners.
Wall Street followed the lead of European markets, which saw significant losses after British officials said they had thwarted the terror plan. With US officials raising the nation's terror alert to its highest levels ever for international flights, investors worried that more potential attacks have yet to be uncovered.
Airline stocks took the hardest hits, while oil prices moved lower in the belief that reduced travel in the coming weeks and months would curtail demand for fuel.
US oil fell as much as US$1.25 to US$75.10 on the news, and was trading at US$75.30 a barrel at 14:20 GMT. London Brent crude was down US$0.88 at US$76.40, off its US$76.05 session low.
"There is more risk in the world. At times of heightened uncertainty, people sometimes become more risk averse and it sparks a broader sell-off," Craig Pennington, energy portfolio manager at Schroders in London, said of the price move.
"The energy sector is trading broadly in line with the markets, it points to across the board selling," he said.
European stock markets tumbled on news of the plot. London's FTSE 100 index of leading shares lost 1.24 percent to 5,787.80 points, Frankfurt's DAX 30 index shed 1.79 percent to 5,600.95 points and in Paris the CAC 40 fell 1.39 percent to 4,955.48.
The DJ Euro Stoxx 50 index of leading eurozone shares sank 1.35 percent to 3,657.16 points.
News of the plot added to the market's chronic uncertainty over the economy, inflation and interest rates, leaving investors with few reasons to buy stocks, while the bond market also remained flat and the US dollar was mixed.
In midmorning trading, the Dow Jones industrial average fell 24.33, or 0.22 percent, to 11,051.85.
Broader stock indicators also fell. The Standard & Poor's 500 index lost 3.55, or 0.28 percent, to 1,262.40, and the NASDAQ composite index lost 7.27, or 0.35 percent, to 2,053.01.
The US dollar was up against European currencies but down against the Japanese yen, while gold prices fell.
Among individual stocks, airlines suffered due to flight cancelations and concerns about future terrorist attacks. British Airways PLC slid US$3.11 to US$70.22, while Continental Airlines Inc fell US$0.66 to US$23.55, United Airlines parent UAL Corp slid US$1.10 to US$22.73 and American Airlines parent AMR Corp lost US$0.76 to US$19.53.
In Frankfurt, Lufthansa plunged 4.44 percent to 14.00 euros after the German carrier canceled all its flights to Britain.
"In the short term, this is not good news for airline share prices," Panmure Gordon analyst Gert Zonneveld said. "BA looks more sensitive than the two low-fare carriers [Ryanair and easyJet], due to its high profile name and route network across the North Atlantic."