Stocks Snap Losing Streak as Oil Prices Stabilize [Video]
Global equity markets sold of sharply this week as violence in Libya, Africa's third-largest oil producer and a member of OPEC, caused oil prices to hit levels not seen in more than two-and-a-half years.
The Dow Jones Industrial Average ($INDU) rose 62 points, or 0.5%, to close at 12,130. Prior to Friday's session the blue-chip index lost more than 300 points in three days. It finished the holiday-shortened week down 2.1%.
The broader S&P 500 ($INX) closed Friday up 14 points, or 1.1%, at 1,320. The tech-heavy Nasdaq Composite ($COMPX) added 43 points, or 1.6%, to finish at 2,781. For the week, the S&P 500 and Nasdaq lost 1.7% and 1.9%, respectively.
Stocks suffered their worst week of the year after crude oil futures spiked nearly 14% on concern that civil war in Libya could disrupt supply or even spill over into Algeria, Bahrain and Saudi Arabia. Benchmark crude oil traded on the Comex division of the New York Mercantile Exchange briefly crossed $100 a barrel this week but by Friday the rally lost steam, as the April contract rose 60 cents, or 0.6%, to settle at $97.88 a barrel.
Economic news was mixed, as a surprise downward revision to fourth-quarter GDP was offset by consumer sentiment hitting a three-year high.
Friday's action was likely dictated by technically oversold conditions heading into the last trading day of the month on Monday, says Alan Valdez, director of trading operations at DME Securities. Beyond that the market remains wary of what higher oil prices could mean for consumer spending and the pace of economic growth, the veteran New York Stock Exchange (NYX) trader says.
"You see program trading taking the market back up today on light volume, but remember: Every penny that oil goes up at the gasoline pump, it's $400 million out of consumer spending," says Valdez. "That's $400 million not going to Walmart (WMT) or 7-Eleven. It's a huge drag on the economy."
Speaking of Walmart, Valdez says the retailer's disappointing fourth-quarter report earlier this week and Friday's downward revision to GDP suggest that consumers aren't spending as much as Wall Street had hoped -- regardless of what the consumer sentiment survey showed.
"For traders, the real survey of consumer sentiment is Walmart," he says. "About 150 million people a week shop at Walmart. And their sales were a little light their, and guidance was a little light."
For more on Valdez's view from the floor of the NYSE, see the video above.