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Investors cautious as oil prices climb

By MICHAEL J. MARTINEZ
The Associated Press

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The Dow Jones industrial average closed down 24.26 at 10,289.10.

Microsoft, one of the 30 Dow stocks, edged 2 cents higher to close at $27.28 a share. Boeing, also a Dow stock, fell 79 cents to $53.26 after a hitting recent string of 52-week highs.

Broader stock indicators were markedly higher. The tech-focused Nasdaq composite index was up 19.01 at 1,869.65, while the Standard & Poor's 500 index gained 2.11 to 1,118.38.

Investors grew more cautious through the session as oil prices climbed, topping the $44 per barrel mark after weeks of declines. A barrel of light crude rose $1.84 to settle at $44.61 a barrel on the New York Mercantile Exchange.

Wall Street was also disappointed by the Commerce Department's report on wholesale inventories, which rose 1.3 percent in July, double what economists had expected. Wholesale sales rose by only 0.5 percent — which means that business and consumer spending has trailed off and more products are sitting in warehouses.

"We're starting to see some real evidence of softness in consumer spending," said Russ Koesterich, U.S. equity strategist for State Street in Boston. "I don't think the economy is falling off a cliff. It's chugging along at a moderate pace, but will it be enough to keep corporate profits where they need to be? That's the question."

Improvements in the nation's job picture could help spur consumers. The Labor Department reported 319,000 new unemployment claims for the past week, down 44,000 from a week ago. It was the lowest level of first-time claims since July.

The economic data will probably weigh heavily on the Federal Reserve as it prepares to meet Sept. 21 to discuss another increase in the nation's benchmark interest rate, which stands at 1.5 percent. The improved jobs picture increases the chances that the Fed will raise rates by a quarter percentage point, even though raising rates in the midst of an election can sometimes weigh on the presidential incumbent.

While Fed Chairman Alan Greenspan was optimistic about the economy's strength in his congressional testimony Wednesday, Wall Street has taken a more cautious view, waiting to see how the summer's economic slowdown will affect third- and fourth-quarter earnings.

"The takeaway we're getting from the Fed is that the economy's growing, but it's uneven," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers. "Add to that the lack of direction in the market, and the next catalyst for the market won't be the Fed meeting or interest rates. It'll be company earnings, and whether there's been enough top-line movement to have an impact on the bottom line."
 
Tech stocks, battered this summer after a series of disappointing earnings reports, were buoyed by a rare spate of good news. Nokia jumped $1.06 to $13.77 after the Finnish maker of cellular phones raised its sales and profit outlooks for the current quarter. The company cited stronger demand for multifunction mobile devices.

Shares of Texas Instruments surged 10 percent on news it expected third-quarter earnings to come in above the middle of its previous estimate range. Investors shrugged off the chip maker's warning that sales could fall below its past outlook.

During the session, National Semiconductor reported a 29 percent jump in sales, beating Wall Street estimates by 5 cents per share, but added that profits for the current quarter would likely fall 8 to 10 percent in comparison. Still, its stock closed 52 cents, or 4.4 percent, higher at $12.52.