Stocks ended mixed Wednesday as economic worries continued to rain down on the market and dampen the post-Gustav rally.
All three major indexes had been negative for most of the day, but the Dow Jones Industrial Average tip-toed over the line at the last minute, eking out a gain of 16 points, or 0.1 percent. (Track all of the Dow 30 stocks here.)
Relief that Hurricane Gustav didn't wreak more havoc than it did gave the market a boost on Tuesday, pushing the Dow up by 250 points at one point. But tech weakness, prompted by concerns that the global slowdown will crimp tech spending, sucked the air out of the rally and stocks never recovered.
"People are glad that oil is selling off but they're more concerned about the economy," Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, told CNBC.
Crude oil fell 36 cents a share to settle at $109.35 a barrel, weighed down by slowing global demand and relief that Hurricane Gustav spared most major oil facilities in the Gulf of Mexico.
Where oil goes from here is anybody's guess. Axel Busch of Energy Intelligence told CNBC that we could see it go as low as $85 a barrelif political tensions subside. Goldman Sachs, however, expects oil to spike back to $149 a barrel by the end of the year, supported by robust demand from China, which shut down some of its energy-hungry factories during the Olympics, Goldman said.
Meanwhile, the dollar hit an 11-month high against the euro, on the back of falling oil prices and on widespread worries that while the worst is over for the U.S. economy, it's Europe's turn to face the brunt of the credit crunch.
Fannie Mae gave a boost to financials — and for a brief, shining moment the whole market — after the home-financing giant said it sold $2 billion of short-term debt at a lower interest rate than last week. But gains fizzled by the end of the day and Fannie shares ended down 1.5 percent.
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Rival Freddie Mac rose 3.9 percent after thte firm sold $3 billion of two-year notes. Solid demand for both offerings indicated that both firms continue to have access to debt funding, which is necessary to keep their businesses afloat.
Lehman Brothers gained 5 percent following news that Ospraie Fund, a commodities fund in which Lehman has a 20 percent stake, is closing and will return money to investors after incurring big losses this year.
The rumors about Lehman continued to swirl in all directions: An investment in Lehman by Korea Development Bank in conjunction with other banks appeared to be on the rocksafter two banks involved distanced themselves from that speculation. Meanwhile, the name of another possible suitor was being bandied about in the market today: HSBC.
Techs, which are seen as having the most exposure overseas, were among the hardest hit by the economic worries and the dollar's drop.
Qualcomm shed 3.7 percent, draggin on the Nasdaq, after the chip maker's CEO told CNBC that the company is seeing signs of users slowing their cellphone upgrades.
Corning skidded 13 percent after the company, which is the world's largest maker of glass for liquid-crystal displays for televisions and computers, slashed its third-quarter outlook.
Intel and Hewlett-Packard were among the biggest drags on the Dow, along with commodity stock Alcoa .
Shares of Ambac Financial surged 22 percent following news that the bond insurer gained approval from the Wisconsin Department of Insurance to reactivate its Connie Lee Insurance unit to begin offering coverage of municipal bonds and other public finance instruments.
Also, Ambac showed signs that investors' faith is being restored in its credit standing, as it reported a $2.47 billion unrealized loss in the fair value of July credit derivatives.
Coca-Cola will pay $2.5 billion for Chinese juice maker Huiyuan, triple its value, tightening its grip on a booming market in the biggest foreign takeover in China.
In economic news, factory orders jumped 1.3 percent, more than the 1 percent expected, in July, helped by a rise in transportation orders. However, even when transportation was stripped out, orders still rose 1 percent. Factory orders have now risen for five straight months.
Regional Fed branches reported softness heading into the fall, according to the Fed's beige-book report. A growing number of analysts now say the economy will hit another rough patch later this year as both businesses and consumers curb spending.
Auto makers released August sales and, with the exception of Nissan, reported a 10th straight month of declineas pinched consumers held off on major purchases.
General Motors shares shot up 5.8 percent, making it the biggest gainer on the Dow, after the auto maker reported a 20-percent drop in sales, which was at the low end of the expected forecast, 19 to 37 percent.
Ford's U.S. sales tumbled 27 percent, while Toyota sales dropped 9.4 percent.
Retailers will issue their reports on August same-store sales on Thursday. Most retail stocks were up ahead of the reports, notably beaten-down department stores and the home-improvement chains. However, discounters Target and the teen-apparel chains declined.
Home Depot was the Dow's No. 2 gainer, climbing 4.5 percent, after the company's CEO said the housing sector will likely remain under pressure through early 2009 but that the end is in sight. A day earlier, Goldman Sachs raised its rating on Home Depot to "buy" from "neutral."
MONDAY-THURSDAY: Republican National Convention
WEDNESDAY: GOP VP Candidate Sarah Palin speaks at convention
THURSDAY: Same-store sales; Monster employment report; jobless claims; productivity; ISM services index; Fed's Yellen speaks; Earnings from Toll Brothers
FRIDAY: August jobs report; earnings from Nat Semi
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