Oil-Price Rise Throws Wrench into Rally

Thursday offered Exhibit A as to what happens when momentum meets a dose of economic reality. Closing out a strange month that has seen the Dow Jones Industrial Average rise nearly 7% while oil prices jumped over 8%, stocks slipped on Thursday as the highest crude prices in two-and-a-half years gave investors pause. The Dow fell 31 points to 12,320 while the S&P 500 dropped 2 points to 1326. Oil settled at $106.72 a jump of 2.5%. Still, the framework that has comprised the latest rally in stocks was still present on Thursday. The Nasdaq outperformed, managing a small gain of 4 points to 2781. Small-caps, meanwhile, added another 0.4% (as per the Russell 2000) after setting a new three-and-a-half year high on Wednesday. And, let’s face it — this was barely a down day in stocks. The Dow Jones Total Stock Market Index fell just 0.1% and advancers outnumbered decliners on the New York Stock Exchange by a margin of about 3-to-2. But the weight of the large-caps tilted the margin away from the bulls. Only seven of the Dow’s 30 components finished in the green, and modest givebacks in shares of American Express (NYSE: AXP ), Intel (NASDAQ: INTC ) and Home Depot (NYSE: HD ) helped to pull the index lower. Financials, in fact, were not biting all day, with the Financial Select Sector SPDR (NYSE: XLF ) exchange-traded fund slipping 0.4%. As the flavor of the two-week rally in stocks has decidedly been of the small-cap/tech/energy stock variety, it’s helpful to remember the XLF is still 5% below its high for 2011, suggesting fundamentals have not been at the forefront of the collective investing mind lately. Other stock sectors were more clearly affected by the rise in oil. Airline stocks, which had enjoyed a mild runup in the wake of moderating crude prices, fell 2.2%. Gambling stocks also fell, presumably on the expected impact on personal travel. Las Vegas Sands (NYSE: LVS ) ended 2.9% lower. Although signs this week suggest a positive jobs report on Friday, it’s worth remembering that a move toward $110 oil isn’t much help for those with or without a job.
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