business

NEW YORK - Stocks fell Monday as higher oil prices weighed on the market.

Oil hit a two-year high early in the day, nearing $107 a barrel, after forces loyal to Libyan leader Moammar Gadhafi launched airstrikes against opposition fighters at an oil port. Benchmark West Texas Intermediate crude gained $1.02 to settle at $105.44 per barrel.

The market has been shaken in recent weeks by the uprising in Libya and its effect on oil prices. A sustained rise in the price of oil could hurt the economic recovery by raising manufacturing and transportation costs.

Rising crude prices have pushed U.S. gasoline prices higher. Pump prices have jumped an average of 39 cents per gallon since the Libyan uprising began in mid-February, forcing motorists to pay an additional $146 million per day for the same amount of fuel.

Stocks had started higher on news of two corporate deals. Hard-drive maker Western Digital Corp. jumped 16 percent after announcing plans to buy Hitachi Global Storage Technologies for $4.3 billion. French fashion conglomerate LVMH Moet Hennessy Louis Vuitton says it will buy Italian jeweler Bulgari SpA for $6 billion.

Investors fear that oil prices could surge even higher if the unrest in the Middle East and North Africa spreads to major oil-producing countries like Saudi Arabia.

"The market is going to have to sort out what's fact and what's rumor," said Quincy Krosby, market strategist for Prudential Financial. "They are saying, 'How high can the prices go, and more importantly for how long?'"

The Dow Jones industrial average fell 79.85 points, or 0.7 percent, to close at 12,090.03.

The Standard & Poor's 500 index fell 11.02 points, or 0.8 percent, to 1,310.13. The Nasdaq fell 39.04 points, or 1.4 percent, to 2,745.63

All three indexes have lost more than 1 percent so far this month.

The dollar rose, as did utility companies. The utility company index within the S&P 500 gained 0.4 percent even though the overall index declined. The CBOE market volatility index jumped 8 percent to 20.66, a sign that investors expect stock trading to become more turbulent.

Starbucks rose 1.4 percent after CEO Howard Schultz told the Wall Street Journal the company is looking for companies to acquire. McDonald's Corp rose 0.3 percent, the biggest gain among the 30 companies that make up the Dow average. Alcoa Inc. fell the most, 2 percent.