Stocks drop as oil tops $66 a barrel

Traders work in the crude oil futures pit at the New York Mercantile Exchange. Crude oil prices reached 6 Tuesday as Iran's nuclear ambitions and an attack on an oil platform in Nigeria kept traders edgy about potential supply snags.

? Stocks skidded Tuesday as oil prices rose past $66 a barrel and Wells Fargo & Co. and other bank earnings disappointed the market.

U.S. investors sold off equities as crude oil futures soared after an attack on an oil platform in Nigeria, the fifth largest oil exporter to the United States. A barrel of light crude settled at a three-and-a-half month high of $66.31, up $2.39, in trading on the New York Mercantile Exchange.

Oil prices have been creeping higher for weeks but Tuesday’s “sharp rise” bit into stocks as investors consolidated gains from the first weeks of January, said Steven Goldman, chief market strategist for Weeden & Co. in Greenwich, Conn.

Disappointing bank earnings also spurred selling. Wells Fargo missed analysts’ expectations, saying a spike in personal bankruptcies in the fourth quarter hurt its results. Cincinnati-based Fifth Third Bancorp said its margins are narrowing and its net interest income fell 2 percent from the year-ago period.

Falling international markets also troubled U.S. investors. Japan’s main stock index fell 2.84 percent, its biggest loss in nearly two years. The news sparked a selloff of other Internet companies and pushed down auto and electronics stocks.

Trading has been choppy as investors react strongly to oil price increases or any hint of weak earnings.

“If oil continues to stay at these levels for a sustained period, it will bite into economic activity and renew inflationary pressure,” said Peter Cardillo, chief strategist and market analyst, S.W. Bach & Co. “That could put into question if and when the Fed will end its tightening cycle.”