Oil prices retreat, but stocks still dip
NEW YORK » Wall Street ended a whipsaw day mostly lower, as fears of escalating instability in the financial sector kept investors on edge despite a steep retreat in oil. The Dow Jones industrials yesterday had their first close below 11,000 since July 2006.
Just days after the government said it would aid Fannie Mae and Freddie Mac if necessary, Federal Reserve Chairman Ben Bernanke told Congress the U.S. economy faces "numerous difficulties." During the day's testimony, Treasury Secretary Henry Paulson also said the Bush administration has no immediate plans to lend money to the mortgage giants or buy their stock.
The stock market did benefit from some bargain-hunting as oil retreated from its near-record levels, but the uncertainty of the financial sector made that recovery hard to sustain. If oil prices stabilize or retreat, consumers might feel more comfortable spending on discretionary items, and in turn help the economy.
A barrel of light, sweet crude dropped $6.44 to settle at $138.74 on the New York Mercantile Exchange as traders bet that the weak economy in the United States and elsewhere will take its toll on global demand.
While some of the market's most battered bank stocks - including Washington Mutual Inc., Lehman Brothers Holdings Inc., and regional bank First Horizon National Corp. - finished higher yesterday, most bank stocks gave up their brief rallies by the end of the session.
The Dow fell 92.65, or 0.84 percent, to 10,962.54. It was the blue chips' lowest close since July 21, 2006; the high price of oil is one of the major reasons the Dow has been trading at nearly two-year lows.
Broader stock indicators ended mixed. The Standard & Poor's 500 index fell 13.39, or 1.09 percent, to 1,214.91, while the Nasdaq composite index rose 2.84, or 0.13 percent, to 2,215.71.
The Russell 2000 index of smaller companies fell 2.15, or 0.32 percent, to 662.35.
Declining issues outnumbered advancers by nearly 3 to 1 on the New York Stock Exchange, where volume came to 1.86 billion shares.
The technology-dominated Nasdaq got a lift from Microsoft Corp., which rose $1, or 4 percent, to $26.15 after an Oppenheimer & Co. analyst said the software company's shares "look attractive" ahead of its quarterly results scheduled for tomorrow.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.83 percent from 3.86 percent late Monday.
Among the stronger stocks of the day were Lehman, which rose 82 cents, or 6.6 percent, to $13.22; WaMu, which rose 38 cents, or 11.8 percent, to $3.61; and First Horizon, which rose 85 cents, or 16.9 percent, to $5.89.
First Horizon named a new CEO yesterday.
But Fannie Mae fell $2.66, or 27 percent, to $7.07, and Freddie Mac fell $1.85, or 26 percent, to $5.26.