A rally in bank stocks kept the Dow stable Tuesday morning, but the
broader market slipped as rising oil prices and comments from Fed chief
Ben Bernanke raised worries about inflation and higher interest rates.
Stocks had slid across the board in the early going, but the Dow
managed to cut early losses as financial share bounced back after
Monday's drubbing.
Stocks were mixed Monday after Lehman Brothers' big quarterly loss,
Apple's new iPhone announcement and comments from two Fed officials
that suggested the central bank will soon have to raise rates to combat
inflation. Fed chief Ben Bernanke echoed a similar sentiment in a
speech late Monday night.
Speaking at a conference Monday night, Bernanke indicated
that the Fed may soon need to raise interest rates, to combat rising
commodity prices and other inflationary pressures and to help the
weakened dollar.
Bernanke also said that despite a big jump in unemployment in May, the
danger that the economy has fallen into a "substantial downturn" seems
to have eased.
The gap between imports and exports grew more than
expected in April, the government reported, due largely to high oil
prices. The trade gap swelled to $60.9 billion in April, a 13-month
high, from a revised $56.5 billion in March. Economists expected $60
billion, on average, according to a survey by Briefing.com.
After sliding more than $4 a barrel on Monday, oil prices
gained anew Tuesday. U.S. light crude oil for July delivery gained
$2.45 to $136.80 a barrel on the New York Mercantile Exchange.
Company news: A variety of financial stocks bounced back Tuesday,
finding some momentum after Monday's big slide. Gainers included Dow
components AIG, American Express, Bank of America, Citigroup and JP Morgan Chase.
Washington Mutual climbed 10% after sliding 17% Monday on
worries that the lender is in for billions more in writedowns over the
next three years, amid the subprime mortgage meltdown.
Lehman Brothers was an exception, falling for a second session
as analysts said that the firm is likely to see years of smaller
profits as a result of its plan announced Monday to raise an additional
$6 billion in capital. The brokerage forecast Monday that it would post
a quarterly loss of nearly $2.8 billion.
In merger news, XTO Energy said its buying privately-held Hunt
Petroleum for $4.19 billion in cash and stock. Shares of XTO rose 3%,
briefly touching an all-time high in morning trading.