Oil Price Drop Doesn’t Stir Stocks
Equity investors all but ignored another substantial retreat in oil prices Tuesday, leaving stocks mixed in a listless and lightly traded session.
Tech stocks fell in response to a brokerage downgrade of Cisco Systems, while blue chips got a boost from an upgrade of Caterpillar.
Although oil dipped briefly below $45 a barrel during the session, two days of falling prices were insufficient to lure cautious investors back into the market.
Investors appeared concerned that oil prices, which topped $49 a barrel late last week but closed down 84 cents Tuesday to close at $45.21, could advance again. Another sharp rise could raise corporate costs and reduce consumer spending, thus harming third- and fourth-quarter earnings
“Without any real big economic or geopolitical news here, the market’s keying off of oil,” said Jay Suskind, head trader at Ryan Beck & Co. “But we’re in the dog days of August here, so there’s just not going to be a lot of volume or conviction here.”
Many investors were also making few trades leading up to the Republican National Convention next week in New York, analysts said. They were also holding back as they awaited the government’s employment report for August, due at the end of next week.
The Dow Jones industrial average was up 25.58 points, or 0.2%, at 10,098.63.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was up 0.51 of a point, or virtually flat, at 1,096.19, and the tech-focused Nasdaq composite index lost 1.81 points, or 0.1%, to 1,836.89.
Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange.
An increase in stock options granted by Cisco caused brokerage UBS to lower its price target for the network equipment maker by $1 a share. Cisco slid 21 cents to $18.97. Tech shares have been closely watched as they begin more thorough accounting of their stock options, a key part of many tech companies’ compensation costs.
The market had little reaction to the National Assn. of Realtors’ report on sales of existing homes, which showed that 6.72 million units changed hands in July, down 2.9% from June and less than economists had expected. Rising consumer prices and a drop in consumer confidence were blamed for the decline. However, it was still the third-best monthly reading on record, showing that home buyers were still taking advantage of low interest rates.
Though the housing data and oil prices were good news, it was difficult for buyers to gather any strength. Echoes of the last bear market have made investors cautious, especially in low-volume sessions like Tuesday’s.
“People are very lethargic, and it’s because it’s been a very difficult market,” said Richard Driehaus of Driehaus Capital Management in Chicago.
Market action in U.S. Treasuries was also muted in sleepy summer trade. The yield on the benchmark 10-year note stuck at 4.28%, unchanged from Monday.
In other markets highlights:
* Google, which sold $1.92 billion in stock to investors last week, had its first decline as a public company, falling $4.53 to $104.87. Shares in the Internet search engine company still are up 23% from their initial offering price.
* Other tech stocks fell with Cisco and Google. Intel slipped 22 cents to $21.67, Juniper Networks dipped 40 cents to $21.60 and Applied Materials was down 29 cents at $15.93. The declines came despite a survey by consulting firm Accenture suggesting that information technology spending will rise over the next three years.
* An index of transportation stocks rose 1% as oil prices retreated. Southwest Airlines, the No. 1 U.S. low-fare carrier, rose 26 cents to $14.86 and Norfolk Southern, the No. 4 railroad, gained 30 cents to $27.47.
* Caterpillar helped lift the Dow, rising $1.10 to $73.15 after Goldman Sachs upgraded the stock to “outperform,” citing strong profit performance and an attractive share price.
* Food producer H.J. Heinz rose $1.03 to $37.63 after its earnings report matched analysts’ estimates.
