NEW YORK Wall Street closed mostly lower Tuesday after a dip in oil prices failed to keep investors from fretting over the economic effects of high energy costs.
Crude oil's retreat below $132 a barrel did encourage some investors to search for bargains in stocks created by last week's big plunge. The financial sector, for one, saw strong demand after taking a beating Monday when Lehman Brothers Holdings Inc. reported a larger-than-expected quarterly loss.
But the overall stock market was volatile, with investors flummoxed about the direction of the economy. Federal Reserve Chairman Ben Bernanke late Monday said that while a substantial downturn seems unlikely, inflation risks are growing. His remarks raised expectations that the central bank might hike interest rates later this year to curb inflation; more expensive borrowing could jeopardize an economic rebound.
And although investors got some temporary relief from the oil market Tuesday, they remain concerned that high energy prices will not just aggravate inflation, but also stymie consumer spending and, in turn, economic growth.
"If you bet against the consumer over the past several years you would've been wrong. The consumer has held up surprisingly well. However, at some point there is a breaking point. I think some people believe we may be approaching that," said Chris Colarik, a portfolio manager at Glenmede Investment Management in Philadelphia.
It is possible oil will stay high for some time. The International Energy Agency lowered its global oil demand prediction Tuesday, but also said oil-producing nations outside OPEC are having a tough time keeping up with demand.
According to preliminary calculations, the Dow Jones industrial average rose 9.44, or 0.08 percent, to 12,289.76, after moving in and out of positive territory throughout the day.
Broader stock indicators declined. The Standard & Poor's 500 index fell 3.32, or 0.24 percent, to 1,358.44, and the Nasdaq composite index fell 10.52, or 0.43 percent, to 2,448.94.Declining issues outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange, where volume came to 1.37 billion shares.