US stocks fell for a third day yesterday as US crude oil prices hovered near $100 (£61.73) a barrel on violence in Libya.
Oil’s sharp rise this week has fuelled worries about the effect of energy costs on consumers and business. US crude oil futures were at their highest since late August 2008, as the escalating problems in Libya sparked supply worries. Brent crude futures hit an intraday high at $119.79 and then pulled back to $114.45 at midday.
But while the Dow and S&P 500 closed down, they finished well off the day’s lows, suggesting investors weren’t ready to give up on the rally.
Oil does have “an economic slowing impact as the price goes, and so the question is, ‘How long will this last?’ and ‘How significant will it be?’ ... It’s hard to decide at the moment,” said Stephen Lieber, chief investment officer of the Purchase, New York-based Alpine Mutual Funds.
Investors may need to take a “wait-and-see” attitude until there's a clearer idea of how events in Libya and elsewhere will turn out, he said.
“My bias is that we are still likely to be in a recovering economy, and if this creates dumping of securities and potential undervaluation, be ready to take advantage of it.”
The S&P 500 was holding above support, suggesting a bigger market pullback may not be in store yet.
The week’s declines have driven calls that a correction is near. The S&P 500 is up about 24 per cent since the start of September, roughly when the recent rally began.
The CBOE Volatility Index, Wall Street’s fear gauge, was down 0.5 per cent at 22.02, reversing course for the first time in two days. The index has an inverse correlation to the S&P 500, indicating stocks could rise.
Helping to limit the Nasdaq’s loss was Priceline.com, which jumped 7.2 per cent to $456.55 after a number of brokerages raised their price targets on the stock. The online travel agency reported a larger-than-expected profit late on Wednesday.
General Motors’ earnings topped estimates, but the stock slid 4.1 per cent to $33.16.
The S&P 500 was trading just above support at 1,296, the index’s January highs, while analysts were also eyeing the S&P 500’s 50-day moving average – now at 1,287 as further support. A break below those levels could indicate further weakness lies ahead.
The Dow Jones industrial average was down down 37.28 points, or 0.31 per cent, to end at 12,068.50. The S&P 500 Index was down 1.3 points, or 0.1 per cent, to finish at 1,306.10. The Nasdaq Composite Index was up 14.91 points, or 0.55 per cent, at 2,737.90.