Nervous investors tussle with oil prices
NEW YORK » Wall Street was mixed in an erratic session yesterday as investors, uneasy about approaching earnings reports, debated whether the drop in oil prices would eventually bring stocks down as well.
Investors had already lost some of their recent ebullience going into the earnings season, worried that 18 straight quarters of double-digit growth in Standard & Poor's 500 companies might be ending. The market was skittish after Sprint Nextel Inc. warned that its 2007 results will miss analyst projections, and after another half-dozen companies warned Monday that fourth-quarter results will come up short.
But investors also wrestled with the positive and negative effects of a continuing slide in oil prices. Warm weather in the Northeast has weakened demand for energy, and at one point drove a barrel of oil to below $54 a barrel.
Not only did this drag shares of major oil and gasoline companies to two-month lows, but caused institutional investors like hedge funds to rethink their positions, analysts said. Some big investors might be taking cash off the table on concern demand for crude might not re-emerge in the near term, analysts said.
"There's a huge financial position on the point of hedge funds and other financial players having positions in oil futures," said Jason Maxwell, a managing director with Trust Company of the West. "People might be unwinding that position because there's so much supply that its dangers that oil is pegged higher six months from now."
The Dow fell 6.89, or 0.06 percent, to 12,416.60. Meanwhile, the broader S&P 500 index dropped 0.73, or 0.05 percent, to 1,412.11.
Technology stocks went against the overall market, with the Nasdaq composite index rising 5.63, or 0.23 percent, to 2,443.83. Leading the composite was Apple Computer Inc., which unveiled its long-anticipated iPhone.
While there were plenty of fluctuations in stocks, fixed-income trading remained range bound with little economic news for traders to act on. Bond prices edged lower, with the yield on the benchmark 10-year Treasury up to 4.66 percent from 4.65 percent Monday.
The drop in oil prices was originally one of the market's biggest motivators, sending shares of transports and retailers higher. But that decline in turn sent shares of major oil and gasoline companies sliding as lower prices could cut into profits. A barrel of light sweet crude fell 45 cents to $55.64 on the New York Mercantile Exchange after being down almost $2 earlier in the session.