- The Washington Times - Wednesday, September 3, 2008

NEW YORK (AP) | Wall Street succumbed to the jitters 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 points.

Falling commodities prices caused the stocks of oil and metals companies to sink, dragging on the broader market, and the technology sector also was 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.

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 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.

Advancing issues outnumbered decliners, however, by about 8 to 7 on the New York Stock Exchange, where volume came to 1.15 billion shares.

Light, sweet crude fell $5.75 to settle at $109.71 a barrel on the New York Mercantile Exchange.

Bond prices shot higher as Wall Street gave up its gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, sank to 3.74 percent from 3.82 percent late Friday. The dollar strengthened against most other major currencies, while gold prices fell sharply.

The Institute for Supply Management (ISM), a trade group of purchasing executives, said Tuesday its index on manufacturing activity fell marginally to 49.9 in August - as expected - from 50 in July. A reading below 50 indicates contraction. The ISM also found that inflation lessened.

Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said the reactions of the energy and stock markets Tuesday illustrate the overall uncertainty about the economy.

“It just shows you how unstable the market is based on the perception of the macro economic outlook. It changes daily. There isn’t a consistent viewpoint of what is actually happening in the economy,” he said.

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