Stocks moved lower mid-morning Wednesday, as oil prices surged and UPS signaled possible weakness in the U.S. economy.
U.S. government data showed a surprise drop in crude stockpiles last week. The price of a barrel of oil jumped to nearly $111 a barrel.
Meanwhile, shipping company United Parcel Service added some market gloom, lowering its outlookbecause of lower volume and higher fuel costs. The news sent its shares down and added to concerns that the U.S. economy will continue to suffer, since UPS' business in large part relies on the sales of other businesses.
But some positive developments helped stem the markets' losses.
Citigroup , the largest US bank, saw its shares rise after saying it is close to a deal to sell $12 billionin leveraged loans and bonds.
The Citi announcement provided at least some assurance that companies are taking proactive measures to shore up their balance sheets. The deal also involves private equity firms Apollo Group, Blackstone Group and TPG.
Additionally, Circuit City surprised the market by posting a small profitafter analysts expected the electronics retailer to show a quarterly loss.
Investors also weighed news from the Federal Reserve, which confirmed that it was contemplating additional liquidity measures if its current recipe of aggressive rate cuts, bond auctions and the opening of the discount window fail to generate more cash-flow in the open market.
In the tech sector, the battle between Microsoft and Yahoo looks set to take a new turn as Legg Mason -- a major shareholder in the portal company -- is ready to back Yahoo's effort to stay independent if Microsoft lowers its buyout offer, according to the Wall Street Journal, which quotes an interview with portfolio manager Bill Miller.
And Dow component Boeing could be active after London newspaper The Times reported the company is set to announce an 18-month delayto its 787 Dreamliner.
"The Citigroup news will help stem any declines because it's signaling that the financials are working out their problems and able to sell off weaker loans," Peter Dunay, chief investment strategist at Meridian Equity Partners in New York, told Reuters. "But there's very little impetus for the upside here, particularly with UPS guiding lower and Boeing delaying one of their airline shipments."
Investors will also listen carefully to a speech on financial literacy by Federal Reserve chairman Ben Bernanke at 9:30 am New York time, looking for more clues on what the Fed's next moves will be.
The Fed is looking at contingency plans to bolster its lending power if recent measures it has taken to unfreeze the credit markets fail, the Wall Street Journal reported.