Stocks decline as oil prices spike again
NEW YORK » Wall Street turned lower yesterday as investors worried that a sharp jump in oil prices could be another sign that consumers are under stress in an economy that is already showing signs of a recession.
The major indexes, which spent most of the session in a tight trading range, tumbled after oil prices shot higher in response to the Energy Depart- m\\ent's report of an unexpected jump in gasoline demand. That could lead to higher prices at the pump, a troublesome trend given that retail gas prices are expected to rise further as the summer approaches and put more financial pressure on consumers.
Consumer spending, which makes up about two-thirds of the U.S. economy, is watched closely by the Federal Reserve. Earlier yesterday, Fed Chairman Ben Bernanke said he "there's a chance" that the economy will contract in the first half -- a trend that, by one unofficial definition, would mean the U.S. is in a recession.
Crude oil rose $3.85 to settle at $104.83 a barrel on the New York Mercantile Exchange.
"The oil uptick took away some of the optimism that we've seen recently," said Richard Cripps, chief market strategist for Stifel Nicolaus.
Some of the pullback late yesterday also was pinned on profit taking after Tuesday's strong advance.
The Dow Jones industrials fell 48.53, or 0.38 percent, to 12,605.83 after changing direction several times.
Broader market indexes also fell. The Standard & Poor's 500 index fell 2.65, or 0.19 percent, to 1,367.53 while the Nasdaq composite index fell 1.35, or 0.06 percent, to 2,361.40. The Russell 2000 index of smaller companies rose 1.62, or 0.23 percent, to 712.27.
Advancing issues barely outpaced decliners on the New York Stock Exchange, where consolidated volume came to 4.19 billion shares, compared to 4.65 billion on Tuesday.
Treasury bonds moved slightly lower as investors weighed Bernanke's testimony before Congress; fixed income investors were focused on hints from Bernanke that the central bank might be less aggressive about lowering interest rates. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.59 percent from late Tuesday's 3.55 percent -- then edged up to 3.60 percent in after-hours trading.
The dollar was mixed against other major currencies, while gold fell slightly.
Investors paid close attention to what Bernanke had to say, and stocks initially rose after the Fed chairman said he doesn't believe the nation's big investment banks face the possibility of a collapse.
And, his warning about a potential recession was really not a shock to investors who trudged through one of the more difficult first quarters in years. Kim Caughey, equity research analyst at Fort Pitt Capital Group, said she didn't believe Bernanke had "anything new to say" and was simply reiterating previous thoughts.
Investors also weighed fresh economic data that indicated factory orders in the U.S. have fallen for a second straight month. The Commerce Department said orders dropped by 1.3 percent in February, about double the downturn that economists had been expecting.
In corporate news, Best Buy Co. said its fourth-quarter profit slipped 3 percent as customer traffic slowed after the holidays. But, the electronics retailer still beat Wall Street estimates, and shares rose 47 cents to $43.94.