Stocks fall as oil plunges amid recession worries

NEW YORK -- Investors pulled away from stocks again Monday as conflicting signs emerged about the direction the economy is taking.

Oil prices fell as traders bet that continued weakness in the economy would crimp demand. But stocks pulled off their lowest levels after a trade group reported that its index of services industry activity rose to its best level in nine months in June.

Investors are cautious after a strong rally in stocks since March, fearing that they might have been too optimistic in their expectations about how soon the economy can recover from the recession that began in December 2007.

Oil fell nearly $3 to below $64 a barrel on the growing belief that the economy won't be strong enough to lift demand for energy as much as had been expected. Last week, oil hit an eight-month high above $73.

In other economic news, the Institute for Supply Management's services index rose to 47 in June from 44 in May. Economists polled by Thomson Reuters had expected a reading of 45.5.

The better-than-expected report wasn't enough to assuage the growing doubts about the economy following disappointing reports last week on consumer confidence and deep job cuts for June.

The market has relatively few guideposts to give it direction this week ahead of second-quarter earnings reports, which get underway on Wednesday with Dow component Alcoa but don't pick up speed until next week.

The market reached a plateau in mid-June, mainly holding on to the gains it notched this spring, but desperately needs more confirmation of an economic recovery before moving higher again. The upcoming earnings season and any forecasts companies make about the rest of the year are sure to answer questions about where the market goes next.

In corporate news, a judge ruled that General Motors can sell the bulk of its assets to a new company, potentially clearing the way for the automaker to emerge from bankruptcy protection.