NEW YORK – Blue-chip stocks pared their early losses Wednesday as investors nervously watching oil prices welcomed some positive economic news, but technology shares closed down amid a disappointing outlook from online travel booker InterActiveCorp. (IACI).
The Dow Jones industrial average (search) rose 6.27 points, or 0.06 percent, to close at 10,126.51, according to the latest data. The Standard & Poor's 500 Index (search) slipped 1.06 points, or 0.10 percent, to 1,098.63. But the technology-laced Nasdaq Composite Index (search) fell 4.36 points, or 0.23 percent, to 1,855.06.
Oil futures dropped more than $1 in New York after an unexpected rise in U.S. gasoline inventories and after OPEC said it has spare production capacity. Contributing to the price drop was a comment from troubled Russian oil company YUKOS, which said bailiffs will allow it to continue to pump oil.
The drop in oil prices helped push the market higher late in the session, said Paul Cherney, chief market analyst at Standard & Poor's.
"It's down pretty big right now," said Paul Cherney, chief market analyst at Standard & Poor's. "It's certainly a contributing factor. That plus the fact that we are in an area of prices on the chart, where the buyers came in before."
On the New York Mercantile Exchange (search), crude oil for September delivery fell $1.32 to settle at $42.83 a barrel -- sharply below the record high of $44.34 hit in overnight electronic trading. That was the highest price in the NYMEX futures contract's 21-year history.
Oil prices have risen by more than one-third since the end of 2003 on worries that accelerating global demand has left supplies tightly stretched with little leeway for disruption.
As crude oil prices fell sharply Wednesday afternoon, the stock market rallied from its lows but was not able to hold all of its gains until the close.
"The market is really driven here by short-term traders. Serious investors have taken the summer off and the momentum traders are motivated largely by the change in oil prices," said Michael Metz, chief investment strategist at Oppenheimer & Co.
Exxon Mobil also was the biggest weight on the Dow and fell 65 cents, or 1.4 percent, to $46.24. ChevronTexaco dropped $2.06, or 2.1 percent, to $96.60.
In some encouraging economic news, the Commerce Department said factory orders advanced 0.7 percent in June, after a revised 0.4 percent gain in May. Economists had expected June factory orders to rise 0.5 percent.
The data were more upbeat than many June numbers and dovetailed with an Institute for Supply Management poll Monday showing U.S. factories picked up their pace in July.
A separate ISM report Wednesday showed that strength spilled into the service sector, which accounts for 80 percent of the U.S. economy. The ISM non-manufacturing index rose to 64.8 in July from 59.9 in June. Wall Street had expected a weaker 61.0 reading.
Second-quarter earnings continued strong, with health insurer Cigna Corp. (CI) posting a profit after a loss. Cigna (CI) climbed 62 cents to $63.20 after beating estimates by an impressive 50 cents per share.
But technology shared suffered as telecom company Ciena Corp. (CIEN) warned that sales would slump significantly in the third quarter. Ciena shares dropped 68 cents, or 25 percent, to $2.08, just above the all-time low of $2.06 it hit during the session.
Shares of InterActiveCorp. fell $4.23, or 16 percent, to $22.80 and exerted the biggest negative pull on the Nasdaq.
Prudential Financial Corp. (PRU), whose headquarters was named in this week's terror alert as a possible target, gained 60 cents to $46.36 as it reported a fourfold increase in quarterly earnings. The financial company posted earnings that were 19 cents a share more than expected.
CVS Corp. (CVS) beat Wall Street estimates by 2 cents per share in its latest earnings statement, reporting a 17 percent rise in profits. The pharmacy chain was down 56 cents at $41.21.
Clothiers Polo Ralph Lauren (RL) and Tommy Hilfiger (TOM) both managed to surpass expectations, with Polo Ralph Lauren doubling its profits on the strength of its women's line, and Hilfiger posting a less-than-expected loss due to slumping wholesale revenues. Polo Ralph Lauren rose $1.44 to $34.56, while Hilfiger was up 49 cents at $13.78.
Trading was moderate, with about 1.37 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.66 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.
The number of advancing issues was about even with the number of decliners on the NYSE, Decliners outnumbered advancers by about 17 to 14 on Nasdaq.
The Russell 2000 index of smaller companies was down 0.96, or 0.2 percent, at 542.67.
Overseas, Japan's Nikkei stock average fell 1.2 percent. In Europe, Britain's FTSE 100 closed down 0.5 percent, France's CAC-40 dropped 1.2 percent for the session and Germany's DAX index tumbled 1.4 percent.
Reuters and the Associated Press contributed to this report.