Investors wait for interest decision in US

Stocks gave up a moderate early advance to close barely changed today after oil prices rebounded from their recent decline, rising as much as a US dollar a barrel.

Investors also moved to the sidelines to wait for Wednesday’s Federal Reserve meeting on interest rate policy.

Wall Street had been flirting with 2006 highs, but the market remains anxious about the possibility that the Fed could raise its benchmark short-term rate, which is now at 5.25%.

Readings of economic growth and inflation remain mixed – the rise in oil carries with it concerns that inflation will accelerate.

The energy and materials sectors were the afternoon’s winners.

“The most significant thing going on today is just the recovery of energy and energy services,” said Richard E Cripps, chief market strategist for Stifel Nicolaus, a broker based in St. Louis.

Some of the indexes that track those groups have lost 7% this month as oil fell, he said.

The Dow Jones industrial average fell 5.77, or 0.05%, to 11,555.00.

Broader stock indicators were basically unchanged after also retreating. The Standard & Poor’s 500 index rose 1.31 to 1,321.18, and the Nasdaq composite index rose 0.16, or 0.01%, to 2,235.75.

The day’s economic news was cheerless. The US Commerce Department said America’s deficit in the broadest measure of foreign trade increased in the spring to the second highest level in history, reflecting a big jump in payments for foreign oil.

The current account deficit rose to 218.4 billion dollars in the April-June quarter, an increase of 2.4% over the deficit the first three months of the year.

The current account is the broadest measure of foreign trade because it covers not only trade in goods and services but also investment flows between countries. The deficit represents the amount the US must borrow from foreigners to cover the shortfall between exports and imports.

“The market is looking ahead to slower economic growth, but not necessarily negative growth,” said Peter Cardillo, chief strategist, senior vice president and market analyst at SW Bach.

Bonds fell, with the yield on the 10-year Treasury note at 4.81%, up from 4.79% on Friday. The US dollar was mostly higher against other major currencies. Gold prices rose.

Crude oil futures rose. A barrel of light crude settled at 63.80 dollars, up 47 cents on the New York Mercantile Exchange after earlier rising more than one dollar.

Freescale Semiconductor, a maker of mobile phone chips, rose 2.10 dollars to 39.26 dollars, a 5.65% increase, on news it would be bought by a private equity consortium in a 17.6 billion dollars cash deal.

Ford Motor Company fell 20 cents to 7.8 dollars after its departing chief operating officer, Anne Stevens, told the Detroit Free Press yesterday: “The company has too many layers, the company is too bureaucratic, and it takes too long to get things done.”

Ford said on Friday it would offer buyouts to 75,000 union workers.

Hewlett-Packard rose 22 cents to 36.40 dollars, continuing to rise despite new revelations about its leak probe. The Wall Street Journal reported that its leak investigation appears to have continued for several weeks this spring after the source of leaked information from its board of directors was identified.

Retailer Sharper Image fell 34 cents to 9.35 dollars after it said it would delay its second-quarter report due to a previously disclosed review of stock option practices.

Declining issues led advancers by four to three on the New York Stock Exchange, where volume was 1.51 billion shares, down from 2.20 billion on Friday, when volume was swollen by quarterly options expirations.

The Russell 2000 index of smaller companies fell 0.51, or 0.07%, at 728.84.