Tesoro (NYSE:TSO) and Sunoco (NYSE:SUN) plunge Thursday on concerns over rising costs of refining.
Stocks extended their losses to a third straight session Thursday as investors continued to fret over turmoil in Libya and how the resulting surge in oil prices might impact the U.S. economic recovery.
However, U.S. stocks pared their declines in the afternoon as crude-oil futures fell amid uncertainty surrounding Libyan leader Moammar Gadhafi's hold on power. In addition, the International Energy Agency said it is prepared to release its emergency oil stockpiles to cover any shortfalls resulting from the turmoil in the Middle East.
The Dow Jones Industrial Average closed down 37.28 points, or 0.3%, to 12068.50. The measure's drop over the past three sessions now amounts to 322.75 points, marking its biggest three-day decline since August.
The Standard & Poor's 500-stock index closed down 1.3, or 0.1%, to 1306.10, led by its energy sector, as shares of refiners weighed. Oil is a refinery's largest cost, so rising crude prices can weigh on profits if refiners aren't able to pass those costs on to customers through higher gasoline or heating-oil prices. Tesoro tumbled $1.30, or 5.4%, to $23.01, while Sunoco fell 1.72, or 4%, to 41.30.
"How they make money is on the spread between what they can buy and what they can sell," said King Lip, chief investment officer at Baker Avenue Asset Management. "The input cost in terms of crude has obviously spiked up, but the gas price of what they can sell at has not caught up. Unless gas prices are going to start really ticking upward, the refiners are going to see some pressure."
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