NEW YORK Wall Street succumbed to its ongoing angst Tuesday, giving up a sharp advance and turning moderately lower after falling oil prices failed to calm the market's nervousness about the economy and the financial sector.
The Dow Jones industrial average initially surged by nearly 250 points as oil prices dropped as low as $105.46 a barrel on reports that the Gulf Coast and its oil facilities were spared heavy damage from Hurricane Gustav. But the positive effect of the storm's outcome on stocks was short-lived, and the blue chips ended the day down 26.
Falling commodities prices caused the stocks of oil and metals companies to sink, dragging on the broader market, and the technology sector was also weak. Furthermore, crude oil eventually lifted off its lows of the day, settling near $110 a barrel and signaling to some traders that oil has the potential to rebound as quickly as it sold off.
"We could have another storm announced tomorrow, and it'd be back up again," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.
The financial sector was stronger than usual on Tuesday, but not enough to lift the stock market. Investors remain fearful that a weak housing market and tight credit environment will keep racking up losses for the nation's major money centers.
"The one problem with financials is that maybe the Street has a good handle on subprime, but they do not have a good handle on commercial or industrial lending," said Philip S. Dow, managing director of equity strategy at RBC Wealth Management.
Due to the high level of uncertainty in the market not to mention low summer trading volumes, which tend to add to volatility investors recently have appeared to be aiming for quick, day-to-day profits as opposed to committing to a long-term strategy, Dow said.
"We've had this manic tape for some time," he said. "By and large, it's just a market that's victim to whatever the news of the day is, without a whole lot of conviction."
According to preliminary calculations, the Dow fell 26.63, or 0.23 percent, to 11,516.92. On Friday, the blue chip index lost 171 points. The biggest drop among the 30 Dow components came from aluminum producer Alcoa Inc., which fell $1.67, or 5.2 percent, to $30.46.Broader stock indicators also turned lower after moving sharply higher in early trading. The Standard & Poor's 500 index fell 5.25, or 0.41 percent, to 1,277.58, and the technology-dominated Nasdaq composite index fell 18.28, or 0.77 percent, to 2,349.24.