Oil prices grab investors’ attention

Stocks finished an uninspiring session mixed Tuesday 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 $59 per barrel, but the historically high prices were still weighing on investors’ enthusiasm for stocks. A barrel of light crude settled at $58.90, 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 skepticism 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 Bush encouraged Republicans in Congress to introduce a proposal that did not include private accounts favored on Wall Street.

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

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

Bonds posted a strong rally after Monday’s selloff, with the yield on the 10-year Treasury note falling to 4.05 percent from 4.11 percent 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 Securites. “There’s no real economic data, not a lot of earnings, nothing really here to guide us aside from oil.”

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

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

Overseas, Japan’s Nikkei stock average rose 0.05 percent. In Europe, Britain’s FTSE 100 closed up 0.2 percent, France’s CAC-40 climbed 0.68 percent for the session, and Germany’s DAX index gained 0.46 percent.