Oil, broker downgrades hurt stocks

NEW YORK — Oil supply concerns and broker downgrades of blue-chip companies left stocks mixed Monday, raising doubts that Wall Street's year-end rally would continue.

Brokerages lowered their ratings on three Dow components — Pfizer Inc., Alcoa Inc. and Verizon Communications Inc. — illustrating the difficulties many companies may have in posting strong profits in 2005.

The rise in oil futures — a barrel of light crude was quoted at $42.98, up 44 cents, on the New York Mercantile Exchange — was prompted by a terrorist attack in Saudi Arabia and protests in Nigeria that raised concerns about the safety of the world's oil supply. The gains reversed a four-day downward trend that allowed Wall Street to look past a disappointing job creation report on Friday.

"The rally ran into some headwinds Thursday and Friday of last week, and the news on oil prices overnight wasn't great, but this market has shown some incredible resilience," said Ken Tower, chief market strategist at Schwab's CyberTrader. "This is a very strong rally, and it should continue at least through the end of the month, with a few bumps here and there."

The Dow Jones industrial average fell 45.15, or 0.43 percent, to 10,547.06.

Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index was down 0.92, or 0.08 percent, at 1,190.25, and the Nasdaq composite index gained 3.29, or 0.15 percent, to 2,151.25.

While oil prices rose, the dollar also saw pressure due to news reports that said the Bush administration was considering replacing Treasury Secretary John Snow. Snow was not overly concerned about the weak dollar, and his replacement is considered likely to follow the same policy.

While some analysts felt investor optimism would be enough to overcome the lingering questions about the economy and oil prices, others felt the problems could become too great for investors to ignore.

"We get that tightness in the oil markets and the dollar problems, and investors get very jumpy," said Hugh Johnson, chief investment officer at First Albany Corp. "It's not a knockout punch or a haymaker or whatever you want to call it, but it's very damaging to optimism, and that could keep this December rally from unfolding."

Better economic news, combined with a resumption of falling oil prices from last week, could spur more buying, analysts said.

Shares of Pfizer fell 68 cents to $27.21 after the company was downgraded by Merrill Lynch to "neutral" from "buy" due to "modest upside potential."

Goldman Sachs said Alcoa will face higher material costs and a complex labor situation in 2005, prompting a downgrade to "in-line" from "outperform." Alcoa was down 44 cents at $32.42.

Verizon Communications Inc. slipped 8 cents to $41.94 after it was cut to "hold" from "buy" at Tradition Asiel Securities. The brokerage said the telecommunication giant's stock was approaching full valuation and did not appear to be heading for another major rise.