Stocks pull back in early trading as oil rebounds
NEW YORK -- Wall Street declined Wednesday as a mild recovery in oil prices sapped the momentum from the previous day's big stock rally.
Following Tuesday's 152-point gain in the Dow Jones industrial average, investors were cautiously watching oil again. Having dropped by more than $9 a barrel over the last two days, crude rose $1.19 to $137.23 a barrel on the New York Mercantile Exchange.
Oil rose after missile testing in Iran rekindled worries that political tension in the Middle East would lead to supply disruptions. Crude supplies in the United States, meanwhile, were down last week, the government reported Wednesday.
Investors were somewhat heartened by Alcoa Inc.'s earnings, which began the second-quarter earnings season after the market closed Tuesday. The aluminum producer reported a profit decline of 24 percent due to increased production costs -- better than anticipated -- though its shares slipped 7 cents to $32.26 after trading higher.
With dismal bank and lender earnings expected in the coming weeks, investors hesitated to jump back into stocks, which have been moving into bear market territory. Many financial services companies declined Wednesday, including government-sponsored lenders Freddie Mac and Fannie Mae. Merrill Lynch & Co. also dropped, after Fitch Ratings put its long-term credit default rating on watch for a possible downgrade.
Investors are bracing for financial companies to take another series of major credit-related write-downs, but the uncertainty about how large they'll be is weighing on the market, said Scott Wren, senior equity strategist at Wachovia Securities.
"As we go into earnings season, it's going to be much of the same as the first quarter," Wren said. "Financials are going to suffer the worst comparisons again; consumer discretionary earnings are going to be down, too."
In early afternoon trading, the Dow fell 77.02, or 0.68 percent, to 11,307.19.
The Standard & Poor's 500 index fell 7.93, or 0.62 percent, to 1,265.77, while the Nasdaq composite index slipped 23.56, or 1.03 percent, to 2,270.88.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to a relatively light 727.9 million shares.
Bond prices edged higher Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.86 percent from 3.89 percent late Tuesday.
