Star-Bulletin news services
Saudi oil pledge fails
to excite investors
NEW YORK >> A renewed rise in oil prices stifled a rally on Wall Street yesterday, leaving stocks mixed and investors worrying that oil will climb further despite Saudi Arabia's vow to boost production.
Even if the Gulf kingdom can ramp up production, higher supplies aren't likely to reach the United States in time for the peak summer driving season. On the other hand, higher prices at the gas pump could put a damper on the nation's economic growth and make it more likely that the Federal Reserve will delay interest rate increases.
The Dow Jones industrial average fell 8.31, or 0.08 percent, to 9,958.43.
In addition to investors' economic concerns, the blue chips were pulled down by the sharp drop in Altria Group shares after a federal judge ruled the Department of Justice can seek the disgorgement of tobacco industry profits as part of its suit against Philip Morris USA and other cigarette makers. Altria closed down $4.37, or nearly 9 percent, at $44.95.
Broader market indexes closed up. The Standard & Poor's 500 index advanced 1.85, or 0.17 percent, to 1,095.41, while the Nasdaq composite index was up 10.89, or 0.6 percent, at 1,922.98.
The price of the Treasury's 10-year note closed up 532 point, while its yield fell to 4.74 percent from 4.76 percent Friday. Two-year Treasury note prices were steady, but their yield dropped to 2.53 percent, down from 2.56 percent Friday.
Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee, said that despite some positive news on oil, investors lacked direction.
"I think the market is basically wrestling with the fact that it's had a good correction and that a lot of the selling is over with, based on the news we know," Berman said. "But I think it is waiting for some good news to get going on the upside."
He noted that volume was light ahead of Memorial Day; that tends to magnify market movements.
Investors looking for good news to peg buying on initially bid stocks up in reaction of the weekend pledge by Saudi Arabia -- the world's largest crude oil exporter -- to increase its output by up to 2 million barrels a day.
U.S. Energy Secretary Spencer Abraham said Sunday Saudi Arabia has promised to pump an additional 600,000 barrels a day starting in June, lifting its daily output to 9.1 million barrels.
Saudi officials also agreed to meet market demand up to their full capacity of 10.5 million barrels going forward, he said.
But analysts worried that it would take time for the kingdom to boost production, and there were signs other members of the Organization of Petroleum Exporting Countries were angered by the Saudi's intention to go it alone after the cartel rejected calls for higher production.
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