Stocks performed a dizzying dance, sliding at the open, improving with economic reports and then doing a do-si-do with oil prices.
Crude oil dropped below $121 a barrel after the EIA reported that crude inventories rose by 5.7 million barrels, more than four times what economists had expected, sending stocks higher. But crude quickly resumed its ascent toward $122, putting stocks back on their downward track.
A brief reprieve came from better-than-expected economic news.
Existing-home sales fell just 1 percent between March and April, the National Association of Realtors reported. Of course, the year-over-year comparison was much more dramatic: Home sales were off 20 percent in April from a year earlier. Earlier, a separate report showed U.S. mortgage applications rose for the first time in three weeks.
Nonfarm productivity rose at a 2.2 percent annual rate in the first quarter, better than the 1.5 percent expected and the 1.8 percent logged in the fourth quarter of 2007. Labor costs grew at a 2.2 percent annual rate, the slowest pace in four years.
Market strategists noted that the market's downward trend in the past few sessions is a natural pullback from the rally that started in mid-March, in which the Dow Jones Industrial Average has gained more than 10 percent.
"It's been a great run ... but this is where we get off the train," Bill Strazzullo, chief marketing strategist at Bell Curve Trading, told CNBC, citing persistent problems related to subprime mortgages, the credit crisis and the housing market. And, with the Dow and S&P within 10 percent of their all-time highs, "Ask yourself, do the risks really justify the rewards at these levels? ... No."
"There's little conviction among investors about how long the economy stays weak," Joseph Battipaglia, market strategist at Stifel Nicolaus, told Reuters. "If you're not convinced we'll come roaring out of this in the second half, you're going to be hesitant to commit more capital to the market, and that's why you'll trade in a range."
The Federal Reserve is looking more closely at rising food and energy prices, Kansas City Fed President Thomas Hoenig said, according to Reuters. The could result in more focus from policy makers on the headline consumer price index (CPI), rather than the core CPI, which excludes food and energy prices when measuring inflation.
Cisco Systems after the bell Tuesday beat profit and sales forecastsbut shares slipped amidconcerns that orders have slowed.
Walt Disney was the best performer on the Dow after the media giant reported its profit rose 22 percent and surpassed earnings expectations, helped by its film and theme park businesses.
In European earnings news, French energy group Total said its profit rose 9 percent as record oil prices helped offset weakness in oil and gas production. France Telecom reported its earnings rose 2.7 percent from a year earlier, in line with expectations.
A $14.6 Billion Mobile-Broadband Deal
Sprint and Clearwire announced a $14.6-billion joint venture to provide high-speed wireless Internet access for mobile phones and laptops.
The new company, to be named Clearwire, will receive a $3.2 billion investment from Intel , Google, Comcast, Time Warner Cableand Bright House Networks.
WEDNESDAY: Consumer credit; Earnings from News Corp., Transocean
THURSDAY: Retail same-store sales; Jobless claims; Wholesale trade; Cablevision earnings
FRIDAY: Trade report
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