Stocks Finish Mixed as Oil Prices Rebound
U.S. stocks ended mixed Monday as oil posted its strongest gain since Aug. 24 and other commodities also rebounded.
Concern about the economy’s health also may have weighed on stocks, after a survey of chief executives showed declining optimism about growth prospects.
Some investors are waiting to see what the Federal Reserve says about the economy when policymakers meet Wednesday. The central bank is widely expected to hold its key short-term rate steady at 5.25%, as it did at its August meeting.
Stocks were modestly higher for much of the day, continuing last week’s rally, but sold off late in the session.
The Dow Jones industrial average, which Friday closed within 83 points of the six-year high it reached May 10, slipped 5.77 points, or less than 0.1%, to 11,555.00.
Losers narrowly outnumbered winners on the New York Stock Exchange and on Nasdaq.
But the broader Standard & Poor’s 500 index and the tech-focused Nasdaq composite index edged up. The S&P; added 1.31 points, or 0.1%, to 1,321.18, close to the five-year high of 1,325.76 it reached May 5.
The Nasdaq index eked out a 0.16-point gain to 2,235.75, its highest close since May 15.
A rally in crude oil and other key commodities sapped some of the stock market’s momentum.
Near-term crude futures in New York rose 47 cents to $63.80 a barrel. Gold futures jumped $9.80 to $586.20 an ounce.
Commodity prices, led by energy, had been beaten down in recent weeks on fears that a weaker global economy could slash demand.
The price of crude has plunged in four of the last five weeks and is down 17% from its record close of $77.03 a barrel on July 14.
For the stock market, which has benefited from the slide in commodities and falling interest rates over the last month, “it was a little bit of a shock when oil prices popped up earlier [Monday], but the market held up pretty well and for all practical purposes ended the day unchanged,” said Charles Lieberman, chief investment officer at Advisors Capital Management in Paramus, N.J.
In economic news, the Business Roundtable said its quarterly survey of CEOs showed that their expectations for economic growth over the next six months had dropped to their lowest level in three years.
Also, confidence among U.S. home builders fell to a 15-year low this month, the National Assn. of Home Builders said.
On a positive note, the U.S. Treasury said Monday that corporate tax payments received Friday, the due date for third-quarter payments, were a record $71.8 billion. That makes it likely that the quarter will show continued strong growth in corporate earnings, underpinning stock prices, some analysts said.
“The rally in profits isn’t over,” said Lou Crandall, chief economist at Wrightson-ICAP.
As for commodities, prices were overdue for a bounce-back, some analysts said.
“Fundamentally we are at a crossroads,” said Chris Brodie, manager of Krom River Partners’ commodity hedge fund. “If the global economy keeps strengthening, commodities should remain strong. If we go into a recession, prices will mean-revert to much lower levels.”
Among Monday’s market highlights:
* Treasury bond yields were modestly higher. The 10-year T-note ended at 4.81%, up from 4.79% on Friday. There was some concern in the bond market after the Treasury reported that net foreign purchases of U.S. stocks and bonds totaled $32.9 billion in July, the smallest capital inflow since May 2005.
The U.S. is heavily dependent on foreign money to fund its budget and trade deficits. A drop in foreign capital inflows could put upward pressure on interest rates. Still, the report isn’t expected to change the Fed’s stance of holding short-term rates steady, pending more data on the economy and inflation.
* Commodity-related stocks rallied along with raw-material prices. Exxon Mobil rose $1.65 to $66.30, Chevron added $1.06 to $62.85, copper miner Phelps Dodge jumped $2.48 to $86.21 and Barrick Gold was up 92 cents to $30.
* Home builders’ stocks were generally little changed despite the builder sentiment report, but Home Depot slid 64 cents to $36.58. Brokerage Credit Suisse cut its rating on the stock to “neutral,” citing potential earnings shortfalls because of the housing slowdown. Rival Lowe’s was down 47 cents to $28.88.
* The tech sector was helped by strength in some big names, including network equipment maker Cisco Systems, which rose 12 cents to $22.84, its highest price in more than two years. The stock has zoomed 32% since Aug. 4, after the company gave a bullish sales forecast.
Motorola was up 10 cents to $24.95, a six-year high, after brokerages Merrill Lynch and Deutsche Bank raised their target prices for the stock to $30.
Also, Applied Materials surged 58 cents to $17.78 after the maker of semiconductor manufacturing equipment said it would buy back $5 billion in stock over the next three years.
* In foreign trading, Mexico’s IPC stock index jumped 117.20 points, or 0.5%, to 21,666.07, nearing the record high of 21,822.93 set on May 9. Some investors said they were confident that protests of the July 2 election were losing steam, boosting optimism that President-elect Felipe Calderon would have the support he needs to spur investments in Latin America’s No. 2 economy.
The Mexican index is up 22% in pesos this year and up 18% in dollars, adjusting for the peso’s weakness against the buck.
India’s Bombay 500 stock index rose 0.5% on Monday to 4,604.96. The Indian market plunged from mid-May to mid-June with other stock markets around the world on concern about inflation and interest rates. But the Bombay index has rebounded 35% since June 14, and is 9% below the record high of 5,049.49 set May 10.
