Wall Street stabilised today, closing little changed although another spike in oil prices sent many investors to the safety of the bond market. Scattered bargain-hunting after the previous session’s slide kept selling to a minimum.
The major indexes fluttered through a narrow range for most of the day as investors eyed the highs and lows of oil prices, which hit 57.60 before retreating to settle at 56.40 on the New York Mercantile Exchange.
Richard Dickson, senior market strategist at Lowry’s Research Reports in Palm Beach, Florida, said it was encouraging that stocks did not fall further after yesterday’s 112-point slide, which apart from oil was prompted by a profit warning from General Motors.
“What’s fairly obvious though … is that we haven’t seen prices fall far enough to generate enough enthusiasm to make them break out of this funk,” Dickson said.
The Dow Jones industrial average fell 6.72, or 0.06%, to 10,626.35. The Dow, which lost 112 points yesterday, was held back from a larger gain by new tumult at the big insurer American International Group and more fallout from the profit warning at GM.
The broader indexes managed narrow gains. The Standard & Poor’s 500 index was up 2.14, or 0.18%, at 1,190.21, and the Nasdaq composite index gained 0.67, or 0.03%, to close at 2,016.42.
The bond market pushed higher for a second session as investors moved out of stocks and into less risky investments. The yield on the 10-year Treasury note fell to 4.46% from 4.51% late yesterday. Gold prices fell, while the dollar edged higher against most major currencies.
Opec this week pledged to increase its output, but said today the growing economies of the US, China and Japan would keep demand ahead of supply this year - keeping upward pressure on prices.
Investors worry high energy prices could hurt economic growth and yet stoke inflation, prompting the Federal Reserve to turn more aggressive in raising interest rates. However, some investors are betting that the current oil prices are an aberration caused by speculation, and that prices will moderate.
“I got my fingers crossed that inventories are going to build and Opec is going to manage to squeeze out another million barrels a day,” said Henry Herrmann, chief investment officer at Waddell & Reed Financial, a mutual-fund company in Overland Park, Kansas.
Investors were also uncertain about Standard & Poor’s plan to rebalance its 500 index tomorrow to make it better reflect the number of publicly traded shares of each company.
For instance, the weighting of Microsoft will decrease because a large number of its shares are not available for trading. Exxon Mobil, already the largest stock in the index, will have its weighting increased because all its shares are publicly traded. The change means funds based on the index will have to buy and sell stocks to make their holdings match the new weightings.
Microsoft’s shares slipped 9 cents to 24.54, while Exxon Mobil rose 1.20 to 61.49. Both stocks are components of the Dow Jones industrials.
Elsewhere in the Dow, GM fell 66 cents to 28.35 in a second day of selling after it substantially lowered its earnings forecasts, while AIG lost 2.10 to 60.80 after The Wall Street Journal reported the company may need to restate how it reported revenues on certain insurance policies. On the upside, United Technologies added 86 cents to 102.437, and Wal-Mart Stores gained 1 to 52.33.
Viacom climbed 33 cents to 37.33 after the media conglomerate said it was considering splitting itself into two companies to boost shareholder value.
Toys R Us rose 1.23 to 26 after it said it will be acquired for 26.75 per share, or 6.6 billion plus assumed debt, by an investment group including Kohlberg Kravis Roberts & Co.
Advancing issues outnumbered decliners by nearly 8 to 5 on the New York Stock Exchange, where volume was heavy.
The Russell 2000 index of smaller companies was up 2.54, or 0.41%, at 625.46.