Stocks slip as oil rises
NEW YORK -- Investors bided their time Wednesday, encouraged by rising commodity prices but hesitant about making big moves ahead of regional economic data.
The major stock indexes slipped modestly Wednesday after oil touched a new high for 2009 above $71 a barrel.
Commodity prices have been rising in recent days, reflecting hopes that economic activity will improve and boost the appetite for basic materials. Declines in the dollar have also pushed commodity prices higher. The dollar was falling again Wednesday morning, while gold prices rose.
Stocks of most airlines, homebuilders and retailers were lower. The commodity rally has led some investors to fear that the higher prices for materials could be passed along to consumers, causing inflation and potentially crimping consumer demand.
The Dow Jones industrial average has been waffling around 8,700 this month, just below where it started the year, after its massive three-month-long rebound from 12-year lows reached in early March.
It's a good sign the market is holding up after its rally," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. But "we're going to need to have more positive news on the economic front to make another push higher."
Asian markets rose as inflation fears eased in China, where a new report showed prices fell in May for a fourth straight month. That could give the Chinese government more room to carry out a major stimulus plan.
The upward march of oil prices and other commodities lifted shares of energy and basic materials companies.
"It's peculiar — higher oil usually means a better stock market and a better economy," Detrick said. "But there's a fine line. Last year, there was a breaking point. The question is, what is that now?"
Last year, oil prices surged to nearly $150 a barrel before plunging sharply.
Investors will get insight on how the economy is faring Wednesday afternoon when the Federal Reserve releases its beige book report, which measures economic activity by region. The report is due at 2 p.m. Eastern.
