NEW YORK — Wall Street closed mostly lower Tuesday after a dip in oil prices failed to keep investors from fretting over the economic consequences of steep energy costs.
Crude oil’s retreat below $132 a barrel did encourage some investors to search for bargains in stocks created by recent plunges. The financial sector, for one, saw strong demand after taking a beating Monday when Lehman Brothers Holdings Inc. reported a larger-than-expected quarterly loss.
But the overall stock market was volatile, with investors flummoxed about the direction of the economy. Federal Reserve Chairman Ben Bernanke late Monday said that while a substantial downturn seems unlikely, inflation risks are growing. His remarks raised expectations that the central bank might hike interest rates later this year to curb inflation; more expensive borrowing could jeopardize an economic rebound.
And although investors got some temporary relief from the oil market Tuesday, they remain concerned that high energy prices will not just aggravate inflation but also stymie consumer spending and, in turn, economic growth.
“If you bet against the consumer over the past several years, you would’ve been wrong,” said Chris Colarik, a portfolio manager at Glen mede Investment Management in Philadelphia. “The consumer has held up surprisingly well.
“However, at some point, there is a breaking point. I think some people believe we may be approaching that.”
It is possible oil will stay high for some time. The International Energy Agency lowered its global-oil-demand prediction Tuesday but also said oil-producing nations outside OPEC are having a tough time keeping up with demand.
The Dow Jones industrial average rose 9.44, or 0.08 percent, to 12,289.76, after moving in and out of positive territory throughout the day.
Broader stock indicators declined. The Standard & Poor’s 500 index fell 3.32, or 0.24 percent, to 1,358.44, and the Nasdaq composite index fell 10.52, or 0.43 percent, to 2,448.94.
The dollar rose against other major currencies, while gold prices tumbled.
The Fed has been worried that elevated commodities prices might curb consumers’ appetite to buy discretionary items. This would pose a serious threat to the U.S. economy and to other nations’ economies as well.
“There has been meaningful concern raised around the world about the uncorking of inflation,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.
He added that data out of Japan and Europe have been suggesting weakness in those countries and that foreign stock markets — particularly China’s — have been stalling.
