Drop in oil prices can’t sustain rally
NEW YORK » Wall Street succumbed to its ongoing angst yesterday, giving up a sharp advance and turning moderately lower after falling oil prices failed to calm the market's nervousness about the economy and the financial sector.
The Dow Jones industrial average initially surged by nearly 250 points as oil prices dropped as low as $105.46 a barrel on reports that the Gulf Coast and its oil facilities were spared heavy damage from Hurricane Gustav. But the positive effect of the storm's outcome on stocks was short-lived, and the blue chips ended the day down 26.
Falling commodities prices caused the stocks of oil and metals companies to sink, dragging on the broader market, and the technology sector was also weak. Furthermore, crude oil eventually lifted off its lows of the day, settling near $110 a barrel and signaling to some traders that oil has the potential to rebound as quickly as it sold off.
"We could have another storm announced tomorrow, and it'd be back up again," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.
The financial sector was stronger than usual yesterday, but not enough to lift the stock market. Investors remain fearful that a weak housing market and tight credit environment will keep racking up losses for the nation's major money centers.
The Dow fell 26.63, or 0.23 percent, to 11,516.92. On Friday, the blue chip index lost 171 points. The biggest drop among the 30 Dow components came from aluminum producer Alcoa Inc., which fell $1.67, or 5.2 percent, to $30.46.
Broader stock indicators also turned lower after moving sharply higher in early trading. The Standard & Poor's 500 index fell 5.25, or 0.41 percent, to 1,277.58, and the technology-dominated Nasdaq composite index fell 18.28, or 0.77 percent, to 2,349.24.
Advancing issues outnumbered decliners, however, by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 4.67 billion shares, up from 3.14 billion on Friday.
The Russell 2000 index of smaller companies fell 0.99, or 0.13 percent, to 738.51.
Light, sweet crude fell $5.75 to settle at $109.71 a barrel on the New York Mercantile Exchange.
Bond prices shot higher as Wall Street gave up its gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, sank to 3.74 percent from 3.82 percent late Friday.
The dollar strengthened against most other major currencies, while gold prices fell sharply.
Lehman Brothers Holdings Inc. rose but pared larger gains after the governor of the state-owned Korea Development Bank said discussions were under way to set up a consortium with private banks to acquire Lehman.
Lehman shares rose 4 cents to close at $16.13.
A few financial stocks weakened, including Merrill Lynch & Co., which fell 60 cents, or 2.1 percent, to $27.75.