Oil falls again, but financial sector bothers stocks

NEW YORK -- Stocks traded mixed Wednesday as concerns about the financial sector eroded enthusiasm over a decline in oil prices and a report that signaled modest growth in the service economy.

The worries about financial companies flared after Moody's Investors Service warned it might downgrade the ratings on bond insurers Ambac Assurance Corp. and MBIA Insurance Corp.

Some investors looking to sidestep the troubled financial sector moved into technology stocks, giving the Nasdaq composite index the biggest advance of the major indexes. The bifurcated trading follows two straight sessions of selling that left the Dow Jones industrial average down 235 points.

But the decline in oil at times appeared to help lift market sentiment. Light, sweet crude fell $1.45 to $122.86 per barrel on the New York Mercantile Exchange after the Energy Department reported that demand for gasoline eroded last week and that fuel inventories jumped more than expected. Still, retail gas prices advanced to a fresh record above $3.98 a gallon.

And the Institute for Supply Management's service sector index came to 51.7 percent for May; while any reading above 50 signals economic expansion, the figure is down from 52 in April. Still, the number did indicate that the economy, while behaving erratically, isn't in a steady downturn.

But the renewed concerns about the health of the financial sector kept some buyers at bay.

"Financials again are the lead story. The market is not going to recover until the financials do. They're not going to until all of these balance sheet items are taken care of," said Neil Massa, senior trader at MFC Global Investment Management in Boston.

In late afternoon trading, the Dow fell 46.24, or 0.37 percent, to 12,356.61. The Dow had been up more than 93 points at its high of the session.

Broader stock indicators traded mixed. The Standard & Poor's 500 index fell 4.06, or 0.29 percent, to 1,373.59, and the Nasdaq climbed 13.08, or 0.53 percent, to 2,493.56.

Bond prices fell as stocks advanced. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.92 percent from 3.89 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell.

Hugh Whelan, managing director at Hartford Investment Management Co., said Wall Street will likely remain moored to its current levels until there is a sustained pullback in oil and until a more robust corporate profit picture emerges.