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Traders work on the floor of the New York Stock Exchange May 23, 2014. (BRENDAN MCDERMID/REUTERS)
Traders work on the floor of the New York Stock Exchange May 23, 2014. (BRENDAN MCDERMID/REUTERS)

Dow tumbles more than 100 points as Obama weighs options on Iraq Add to ...

U.S. stocks fell to session lows on Thursday afternoon as concerns escalated about Iraq and after disappointing economic data on consumers and the labor market.

Hours after ethnic Kurdish forces took control of the oil hub of Kirkuk after the Shi’ite-led government’s troops abandoned their posts, President Barack Obama was asked if he might order drone strikes or other action to halt the insurgency that has seized much of northern Iraq this week.

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Obama told reporters that he refused to rule out U.S. action in Iraq against Sunni Islamist militants who have surged out of the north toward Baghdad, threatening to divide the country and establish their own jihadist state.

The stock market’s losses quickly accelerated following Obama’s comments, with industrials and consumer discretionary sectors leading the decline.

The CBOE Volatility index VIX initially jumped 9 per cent to 12.67.

State Department spokeswoman Jen Psaki followed Obama’s comments by telling a daily briefing that the administration was considering all options, except for sending U.S. troops into Iraq.

After she spoke, the VIX pulled back slightly and was up 8 per cent at 12.53.

“It’s a bit of a crisis mode here. Geopolitical concerns have definitely taken over. It’s a very fluid situation and things are happening very fast, it seems,” said Timothy Ghriskey, chief investment officer of Solaris Asset Management LLC in New York.

The Dow Jones industrial average fell 110.91 points or 0.66 per cent, to 16,732.97. The S&P 500 lost 14.03 points or 0.72 per cent, to 1,929.86. The Nasdaq Composite dropped 37.19 points or 0.86 per cent, to 4,294.74.

The Dow touched an intraday low at 16,723.73, while the S&P 500 fell as low as 1,928.27 and the Nasdaq slid to a session low at 4,289.18.

In Canada, losses were much less on the TSX, with the Toronto index only down about 8 points, or 0.06 per cent, at 8.44. It found support from surging crude oil prices, as well as gold - the usual safe haven for investors.

Energy shares were the only gainers on Wall Street. The S&P energy sector index was up 0.4 per cent. Oil prices hit the highest for the year on worries that escalating violence in Iraq could disrupt oil supplies from the major OPEC exporter.

Brent crude futures rose 2.7 percent, the most in ten months, to $113.04 a barrel while U.S. crude added 2.1 percent to $106.56, the highest reading for both since September. The Thomson Reuters/Jefferies CRB index rose 1.1 percent, the most in two months.

“If this conflict knocked out Iraq as an exporter, that would have significant impact on prices,” said Christopher Bellew, a trader at Jefferies Bache. Iraq is the second-largest OPEC producer.

In macroeconomic news, retail sales rose 0.3 per cent in May, half the growth rate that economists had forecast. Americans’ new claims for unemployment benefits unexpectedly rose last week.

While both economic indicators were below expectations, neither was seen as so weak as to change the perception of improving economic conditions, and the market’s recent uptrend is still viewed as intact. Despite a two-day drop in the S&P 500, the benchmark index is only 1.1 per cent below its record close.

Geron Corp was one of the Nasdaq’s most-active stocks, jumping 19.2 per cent to $3.10 on heavy volume after the U.S. Food and Drug Administration lifted a partial clinical hold on a study testing its blood cancer drug.

Lululemon Athletica Inc fell 15.4 per cent to $37.48 on heavy volume. The athletic apparel retailer cut its full-year earnings and revenue outlook.

In contrast to the overall market’s downturn, Restoration Hardware Holdings Inc surged 12.7 per cent to $80.41 a day after the luxury home goods retailer’s first-quarter results.

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