updated 7/7/2005 8:12:49 AM ET 2005-07-07T12:12:49

Stocks moved sharply lower Wednesday, as fears of refining shortages pushed oil prices past $61 per barrel and outweighed a report showing strong growth in the service sector of the economy.

Major Market Indices

Wall Street worried that Tropical Storm Cindy in the Gulf of Mexico would hurt production in the gulf and refinery capacity along the coast. Reports of power outages at two Valero Energy Corp. refineries in connection with the storm heightened investors’ fears. The price of a barrel of light crude surged past $61 to a record high as a result.

The oil worries were offset somewhat by a spike of activity in the service sector. The Institute for Supply Management’s services index for June came in at 62.2 , higher than the 58.9 economists had expected and better than May’s 58.5 reading.

“Considering where oil stands right now, things aren’t all that bad,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC. “The services report was a very pleasant surprise, and that’s helping the markets overcome the rise in oil prices.”

The Dow Jones industrial average finished the day down 101.12 points, or 1 percent, while the broader Standard & Poor’s 500-stock index was off 10.05 points, or 0.8 percent. The Nasdaq composite index, full of technology stocks, fell 10.10 points, or 0.5 percent.

Optimism about the U.S. economy pushed the dollar to an 11-month high against the Japanese yen. The greenback lost ground against the euro and other major currencies. Gold prices rose.

Valero Energy dropped $1.46 to $83.50 after the company said the outages would reduce oil refining capacity slightly. Global demand for oil and distillates have threatened to overtake supply, and while the market noted Valero’s news, the reaction was somewhat muted.

“The thing here is that crude oil prices at $60 just isn’t new anymore,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “The longer it stays up here, the more the market gets used to it. Now, when we see second quarter earnings, and we’re getting some grumblings about oil affecting the bottom line, that’ll be a true test.”

Some investors also were nervous since the government’s weekly energy inventory report, usually released on Wednesday, was delayed a day by the Independence Day holiday.

American International Group Inc. named former Securities and Exchange Commission Chairman Arthur Levitt as a special adviser to the board of directors as the company struggles to emerge from an accounting scandal. AIG fell 35 cents to $59.14.

Halliburton Inc. fell 93 cents to $48.71 even after the U.S. Army awarded the company a $4.97 billion contract to provide logistics support in Iraq. The contract is $1 billion more than the previous year .

General Motors Corp. won a $253 million judgment from the federal government in connection with an underfunded pension plan, The Wall Street Journal reported, though the government is likely to appeal. GM dropped 55 cents to $34.22.

Regional bank Zions Utah Bancorp fell $4.69 to $68.67 after it announced it would buy Texas bank Amegy Bancorp Inc. for $1.7 billion in cash and stock, or $23.32 per share. Amegy fell $1.05 to $21.93.

Overseas, Japan’s Nikkei stock average fell 0.1 percent. In Europe, Britain’s FTSE 100 was up 0.8 percent, France’s CAC-40 gained 0.6 percent for the session, and Germany’s DAX index rose 0.3 percent.

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