Oil price continues to worry Wall Street

Stocks in the United States finished mixed after an uninspiring session today as investors kept a wary eye on near-record oil prices and debated the prospect of a social security reform package without private investment accounts.

One day after reaching record highs, crude oil futures fell below US$59 (€48.49) per barrel, but the historically high prices were still weighing on investors’ enthusiasm for stocks. A barrel of light crude settled at US$58.90 (€48.41), down 47 cents, on the New York Mercantile Exchange.

Some analysts were cheered that stocks have yet to sell off despite higher oil prices, though there are growing worries about whether the market will be able to sustain its gains from May and June should oil prices remain at these levels.

“What we’ve seen yesterday and today is some hesitancy, some scepticism on the part of investors as to whether the current rally can continue” due to high oil prices, said Ken Tower, chief market strategist for Schwab’s CyberTrader. “It’s tough to generate a lot of enthusiasm.”

Investors were also concerned about the state of social security reform after President George W Bush encouraged Republicans in Congress to introduce a proposal that did not include private accounts favoured on Wall Street.

The Dow Jones industrial average fell 9.44, or 0.09%, to 10,599.67

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index was down 2.49, or 0.2%, at 1,213.61, and the Nasdaq composite index gained 2.94, or 0.14%, to 2,091.07.

Bonds posted a strong rally after Monday’s sell-off, with the yield on the 10-year Treasury note falling to 4.05% from 4.11% late Monday. The dollar was mixed against major foreign currencies, while gold prices fell from Monday’s three-month highs.

“You’re seeing some bond movement, which kind of brings a little bit of movement to stocks, but really, there’s not much going on,” said Bryan Piskorowski, market analyst with Wachovia Securities.

“There’s no real economic data, not a lot of earnings, nothing really here to guide us aside from oil.”

The preoccupation with oil led investors to overlook the latest spate of merger news. Wall Street has traditionally found encouragement in mergers and acquisitions, seeing in them a reflection of corporate America’s willingness to make investments in growth – an implicit vote of confidence in the economy.

Appliance maker Maytag Corp. is being courted by two such private investment groups. The company agreed to a US$14 (€11.51) per share takeover last month, but its board said late Monday it would review a US$16 (€13.15) per share offer by another private group backed by Chinese appliance manufacturer Haier Group.

Maytag rose 83 cents to 16.06 on the news.

Declining issues outnumbered advancers by about 9 to 8 on the New York Stock Exchange, where volume came to 1.3bn shares, compared to 1.28bn traded on Monday.

The Russell 2000 index of smaller companies was down 0.80, or 0.12%, at 641.04.