Stocks steady despite higher oil prices
Wall Street finished an uninspired session mixed on Monday as a new record high in oil prices was partly offset by a better-than-expected reading of the nation’s industrial activity and strong sales at Wal-Mart Stores Inc.
The stock market remained resilient in the face of record intraday and closing prices for oil. A barrel of light crude reached an intraday high of $62.30 before closing at $61.57, up $1, on the New York Mercantile Exchange. The death of Saudi King Fahd was cited as creating uncertainty in the oil market.
The surge in oil prices was mitigated by upbeat July sales at Wal-Mart as well as a bullish reading of the Institute for Supply Management’s manufacturing index – showing that both the consumer and industrial sectors have adapted well to high energy costs. However, the strong growth in the economy raised concerns about the Federal Reserve and its policy of gradually raising the nation’s benchmark rate.
“What it’s (economic data) also doing is telling investors that the Fed is not done as quickly as people were thinking two months ago,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. “That’s creating a little bit of headwind for stocks.”
The Dow Jones industrial average fell 17.76, or 0.17 percent, to 10,623.15.
Meanwhile, the broader stock indicators moved higher. The Standard & Poor’s 500 index was up 1.17, or 0.09 percent, at 1,235.35, and the Nasdaq composite index gained 10.55, or 0.48 percent, to 2,195.38.
A continued rise in bond yields drew investors away from stocks. The yield on the 10-year Treasury note rose to 4.32 percent, its highest showing since April, from 4.29 percent late Friday. The dollar edged lower against most major currencies, while gold prices rose.
Investors were encouraged by a surprising gain in the ISM’s manufacturing index for July. The index rose to 56.6, better than the 54.5 economists forecast and higher than June’s 53.8 reading.
Yet while the ISM figures showed a robust growth rate for the industrial sector, the breadth and depth of July’s rally had many investors hedging their bets on whether it could continue through August. The Dow gained 3.56 percent for the month, while the S&P rose 3.6 percent and the Nasdaq surged 6.22 percent.
“Any time you have runs like these, people are always going to get jittery,” said Bill Groenveld, head trader at vFinance Investments. “But to take healthy pauses here and there — there’s nothing wrong with it.”
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where preliminary consolidated volume came to 1.73 billion shares, compared with 1.8 billion on Friday.
The Russell 2000 index of smaller companies was up 3.91, or 0.6 percent, at 683.66.
Overseas, Japan’s Nikkei stock average rose 0.4 percent. In Europe, Britain’s FTSE 100 was up 0.16 percent, France’s CAC-40 gained 0.12 percent for the session, and Germany’s DAX index climbed 0.09 percent.