U.S. stocks ticked higher Wednesday after a sharp rise in crude supplies pushed oil below $114 a barrel.
Banks were plagued by worries about more fallout from the credit crunch, while Hewlett-Packard buoyed techs.
Crude oilfell below $114 a barrelon the New York Mercantile Exchange, after the EIA reported crude supplies rose by 9.39 million barrels, well above the 800,000 build expected. The gasoline supply, meanwhile, dropped 6.2 million barrels
Goldman Sachs stood by its forecast that oil will reach $149 a barrel by year end.
The dollar resumed its march towards its 2008 peaks against a basket of other currencies, helped by concerns about deteriorating economic conditions outside the U.S.
Financials were scrambled, with some trading higher and some lower, amid mounting concerns about fallout from the mortgage crisis.
Shares of Freddie Mac and Fannie Mae fell to their lowest levels in more than 17 years amid speculation that the firms may indeed require a government bailout.
Freddie executives are expected to meet with Treasury officials today, the Wall Street Journal reported. A Treasury spokeswoman said the Treasury is in regular contact with executives from both Fannie and Freddie but wouldn't confirm the rumored meeting with Freddie executives today.
Lehman Brothers finds itself in hot pursuit once again. Yesterday, the IMF's chief economist, Kenneth Rogoff, said a large U.S. bank will fail in the next few months. Today, Ron Ianieri, chief option strategist at the Options University, told CNBC that Lehman is the most likely to fail.
Lehman is said to be mulling a sale of its entire investment-management unitas the fate of CEO Dick Fuld -- and the entire firm -- hangs in the balance. CNBC's Jim Cramer came out swinging at Fuldon Tuesday, saying selling the unit is a bad idea and that Fuld needs to wake up and make a move to save the firm before it's too late.
Goldman Sachs slashed its earnings outlooks for five major banks, saying "Tides are not changing; more writedowns and asset sales to come." The banks were Citigroup, JPMorgan Chase, Morgan Stanley, Merrill Lynch and Lehman Brothers.
In other news, the SEC plans to propose a new short-selling rule in the next few weeks which would be broader than an emergency order covering just 19 financial stocks which ended last week, Reuters reported.
Tech leader Hewlett-Packard reported fiscal third-quarter earnings after the bell Tuesday that beat analyst estimates, helped by strong international sales of laptops and printers. The company also issued a fourth-quarter estimate that surpassed the consensus forecast.
Analysts said it was a good report but remained concerned about the impact of a stronger dollar on HP's outlook. In the last quarter, 70 percent of HP's revenue came from overseas.
On the earnings front, BJ's Wholesale beat expectations by a pennyas shoppers headed to the discount warehouse for food and fuel. The company also raised its full-year profit forecast.
WEDNESDAY: Videogame conference in Leipzig, Germany; Earnings from Limited Brands after the bell
THURSDAY: Jobless claims; leading indicators; Philly Fed survey; GM announces investment plans for Ohio plant; Earnings from Gamestop, Heinz, Hormel, Aeropostale, Gap and Intuit
FRIDAY: Fed conference in Jackson Hole begins; Earnings from WPP, AnnTaylor
WATCHERS: Obama is expected to select a running mate this week ahead of the convention
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