NEW YORK – Stocks ended a wobbly session on the short side Wednesday as crude oil prices hit a four-month high and put a cap on gains fueled by relief over soothing comments from Federal Reserve Chairman Alan Greenspan (search) on the state of the economy.
The Dow Jones industrial average (search) was down 18.03 points, or 0.17 percent, at 10,811.97. The Standard & Poor's 500 Index (search) was down 0.33 point, or 0.03 percent, at 1,210.08. The Nasdaq Composite Index (search) was down 3.75 points, or 0.18 percent, at 2,067.50.
Earlier, the Dow touched a 3 1/2-year intraday high and the S&P hit a two-month intraday high after investors were reassured by remarks from Greenspan.
"Oil prices were relatively calm to start the day, they were around $52 and seemed like they were going the right way, then they rallied, and that certainly has spooked the market," said Brian Pears, head equity trader at Victory Capital Management in Cleveland. "I think people get scared."
Light, sweet crude for April delivery soared $1.37 to settle at $53.05 a barrel on the New York Mercantile Exchange (search), a four-month high. The Energy Department's (search) weekly supply report showed a rise in gasoline and crude inventories, and a decline in stores of distillate fuel, which includes heating oil and diesel. But a separate report from the Paris-based International Energy Agency (search) suggested global energy demands were likely to rise during 2005.
Rising oil prices dampen the stock market in general as they raise costs for companies and consumers, although they boosted energy companies. Exxon Mobil Corp. (XOM) rose nearly 1 percent, or 58 cents, to $62.68, while ChevronTexaco Corp. (CVX) rose 1 percent, or 63 cents, to $61.57.
The dollar edged higher against other world currencies, gold prices were mixed and Treasuries turned bearish; the yield on the benchmark 10-year note was at 4.38 percent, up from 4.37 percent late Tuesday.
Oil worries, combined with persistent concerns about inflation and interest rates, have made for a difficult market, and analysts think more volatility lies ahead. And while the absence of surprises in Greenspan's comments was cause for short-term cheer, it wasn't enough to allay investors' deeper worries, which have contributed to a "one step forward, two steps back" climate for stocks, said Peter Cardillo, chief strategist with S.W. Bach & Co.
"The tone of the market seems strong (but) we're in a cautious atmosphere," Cardillo said. "There's a willingness to buy, but the uncertainties of how high interest rates have to go, and the potential impact of rates moving up in a more aggressive way, has got investors a little bit nervous."
MCI Inc. (MCIP) was up 9 cents at $23.45 after the long distance provider's merger partner, Verizon Communications Inc.(VZ), said MCI could have two weeks to examine a competing bid from Qwest Communications International Inc(Q). The announcement came a day after Qwest executives made a direct appeal to MCI to reconsider its $8 billion bid over Verizon's lower-priced deal. Qwest was down 12 cents at $3.93, while Verizon rose 22 cents to $36.47.
Earnings at Costco Wholesale Corp. (COST) rose nearly 35 percent, but the largest U.S. warehouse club's profit missed analysts' expectations and Costco's shares fell 3.6 percent, or $1.69 to $45.02.
Motorola Inc. (MOT) was down 27 cents at $15.36 after market research group Gartner Inc. questioned whether last year's record-breaking level of replacement handset sales could be sustained, and suggested that this year's battle ground would be selling lower-cost units in emerging markets. Some analysts said growth would likely be slower than the 8 percent Gartner was projecting.
Insurers fell after the Wall Street Journal reported that federal and New York regulators were considering expanding their probes of the insurance industry, saying tipsters had urged New York Attorney General Eliot Spitzer (search) to reopen a probe into Dow component American International Group Inc. Inc.'s (AIG) past ties to Coral Reinsurance Co., a Barbados-based reinsurer.
AIG fell 2 percent, or $1.37, to $65.06. The stock also went ex-dividend Wednesday after which date investors buying the stock aren't entitled to the latest dividend.
William Blair & Co. analyst Mark Lane said the Journal story was "more of the same" bad news about the company and was helping pull its shares lower.
Chiron Corp. (CHIR) jumped 6 percent, or $2.27 to $37.69. British regulators gave a green light for Chiron's flu vaccine plant in Liverpool to start production again in a move that should ensure supplies for the next flu season.
American Eagle Outfitters Inc.(AEOS) rose 6.5 percent, or $3.57, to $58.87, after its fourth-quarter profits nearly tripled as same-store sales rose sharply. Earnings of $1.32 per share beat forecasts by analysts surveyed by Thomson First Call by 7 cents. Costco Wholesale Corp. fell 3.6 percent, or $1.69, to $45.02, after its earnings missed Wall Street estimates by a penny, excluding charges.
Lear Corp. (LEA) slid 11 percent, or $5.76, to $47, a day after the automotive interior systems supplier slashed its first-quarter earnings forecast, citing industry production cuts. Several brokerage houses cut their ratings on the stock, including Wachovia, Lehman, Prudential and Morgan Stanley. AutoZone Inc. (AZO) gained $1 to $98.33 after its second-quarter profits rose more than 30 percent thanks to a tax benefit, lower costs and a boost in sales due to lower fuel prices.
Trading was active, with 1.57 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 2.01 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.
Decliners outnumbered advancers on the New York Stock Exchange by about 6 to 5 and by about 9 to 7 on Nasdaq.
The Russell 2000 index, which tracks smaller company stocks, was down 1.20, or 0.19 percent, at 637.33.
Overseas, Japan's Nikkei stock average added 0.28 percent. In Europe, France's CAC-40 rose 0.19 percent, Britain's FTSE 100 declined 0.15 percent and Germany's DAX index gained 0.22 percent.
Reuters and the Associated Press contributed to this report.