Stocks Refuse Oil Decline Bait

Whats an investor to think when oil prices fall and stocks dont move higher?
Talk of a growing breakdown in the inverse relationship between stocks and oil
prices has bubbled up in recent days but its appearance on Wednesday was front
and center, suggesting the troubling proposition, for bulls, that theres no
longer anything magical about oil priced below $105 a barrel. The Dow Jones
Industrial Average dropped a point to 12,213, and the the S&P 500 slipped 2
points to 1320, even though crude oil slipped 0.6% to $104.38. One dynamic that
did stay true to recent form was the outlying performance by both tech stocks
and small-cap equities. The Nasdaq fell 14 points to 2752, while the Russell
2000 Index slipped 0.3%. As most market-watchers know, its difficult for any
broad rally to take place even during one market day without the full
participation of financial stocks (and in semiconductors, when talking about the
tech sector). Financial names, after a jump on Tuesday, ran out of fuel on
Wednesday. The Financial Select Sector SPDR (NYSE: XLF ) exchange-traded fund
finished precisely flat at $16.77. Shares of the funds second-biggest holding,
Bank of America (NYSE: BAC ), lost 0.7% to $14.59. The slide in chip stocks,
however, is a little more troubling. The Semiconductor HOLDRs (NYSE: SMH ) ETF
fell 3% to hit five-week lows. The Nasdaq is now down 2.8% from its 2011 peak on
Feb. 18. Elsewhere, the energy and mining sectors were mostly lower on
Wednesday, and herein lies the tie-in with small-caps. With the recent parabolic
rise of energy prices not to mention the recent all-time and 30-year-highs set
almost daily by gold and silver prices investors have been sifting through and
bidding up the shares of smaller energy and precious-metal plays, as if the
five-month, 30% run-up in shares of Exxon Mobil (NYSE: XOM ) just wasnt
satisfying enough. In the past few trading sessions, weve come to the other side
of that trade, as the oil-to-$200 trade isnt the sure thing it was even a week
ago. Take Nasdaq and small-cap stock Brigham Exploration (NASDAQ: BEXP ), for
example. From Jan. 24 to Feb. 28, the stock jumped 44%. This month, it
has dropped 8%. Nuff said?