Stocks rebound after
oil price correction

NEW YORK >> Encouraged by a sharp drop in oil prices, Wall Street rebounded from its lows yesterday and closed with just a narrow loss. The market drew support from upbeat earnings news from Johnson & Johnson and Merrill Lynch & Co.

Initially, Wall Street's worries over oil grew as the International Energy Agency raised its forecast for world demand, and as price speculation increased after the Russian government ordered the sale of part of Yukos, that nation's top producer, to pay back taxes. While that pushed oil prices to a new intraday high of $54.45 in early trading, prices later fell sharply -- a total of $1.94 from their highs -- in what analysts suggested was an overdue correction in prices.

A barrel of light crude settled at $52.51, down $1.13, on the New York Mercantile Exchange.

"I think this market is keyed in on oil and is ready to go if oil drops," Bill Groenveld, head trader for vFinance Investments, said of stocks. "As soon as we see any relief in oil, and who knows when that will happen, I think the market starts to move north if there's no earnings surprises this time around."

The drop in oil also allowed investors to enjoy positive earnings from Johnson & Johnson, as well as a fairly good outlook from Merrill Lynch & Co. Inc., even though revenues at the brokerage were lower than expected. The bulk of earnings reports are still to come over the next few weeks.

According to preliminary calculations, the Dow Jones industrial average fell 4.79, or 0.05 percent, to 10,077.18. The Dow had been down more than 64 points earlier in the session.

Broader stock indicators were narrowly lower. The Standard & Poor's 500 index was down 2.55, or 0.23 percent, at 1,121.84, and the Nasdaq composite index dropped 3.59, or 0.19 percent, to 1,925.17.

After five straight days of record-high closing prices for oil futures, the dip in oil prices was a relief on Wall Street. With third-quarter earnings already depressed due to the summer's high fuel costs, the winter heating oil season could bring even more price pressure. That, investors feared, could lead to higher business costs and lower consumer spending, pressuring corporate margins in both directions.

"It's clear that the price of oil has reached a level that creates real questions about earnings and the economy in 2005," said Hugh Johnson, chief investment officer at First Albany Corp. "Add to that concerns about third quarter earnings, though I think most people recognize they're going to be lower than we've seen in the past."

Intel Corp.'s earnings could provide some spark for the markets if oil prices can continue to fall. Intel shares slumped 33 cents to $20.28 during regular trading, after which it announced third-quarter earnings that beat Wall Street estimates by 3 cents per share. Although the expectations were reduced after a disappointing mid-quarter update from Intel last month, the stock surged 71 cents, or 3.5 percent, to $20.99 in after-hours trading.