Stocks struggle as oil slides
The Dow and S&P manage slim gains, but the Nasdaq can't keep up, as investors consider falling commodity prices and a stronger dollar.
NEW YORK (CNNMoney.com) -- The Dow and S&P 500 rose and the Nasdaq slipped Friday in a choppy session in which oil prices flirted with 3-month lows, the dollar rallied, and tech stocks slid.
The Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) index both gained around 0.4%. The Nasdaq composite (COMP) lost a few points.
U.S. light crude oil for September delivery touched a more than 3-month low of $111.34 per barrel on the New York Mercantile Exchange, before recovering to settle at $113.77 per barrel, a loss of $1.24.
Oil prices have plunged around 23% since peaking above $147 a barrel in mid-July. Other commodity prices have been falling too, including gold, silver, aluminum and platinum.
Investors have been betting that the global commodities boom will be tempered by sluggish economic growth in the United States and overseas. On Friday, OPEC said world demand for energy will continue to drop.
The selloff in oil over the last few weeks has had a mixed impact on stocks. It has been good for companies that have seen their profits hit hard by higher fuel costs, as well as retailers and other consumer stocks. But the decline has also dragged down oil stocks such as Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500).
With energy the second-biggest group in the S&P 500, after technology, the weakness in that sector has limited the broader market's moves. And with financials comprising the third-largest sector, any broad market moves have been pretty limited anyway.
"Oil has had a major influence on a lot of areas of the market and, of course, the psyche of the investor sitting on the sidelines with cash," said Jim Porter, portfolio manager of the Aston/New Century Absolute Return ETF (ANENX). "The question is, if oil keeps declining, do you want to get in the market?"
Bets on a global slowdown have also brought more money back into the U.S. dollar, which Friday hit a 2-year high vs. the pound, and also gained against the euro and yen. (Full story.)
Company news: Ambac Financial (ABK) and MBIA (MBI) both gained after Standard & Poor's took the companies' bond insurance arms off negative watch and affirmed their AA ratings. The companies remain on "negative outlook."
Wachovia (WB, Fortune 500) has agreed to buy back $8.5 billion in auction-rate securities, joining 4 other banks that have settled with the New York attorney general.
The New York attorney general said Friday that Merrill Lynch (MER, Fortune 500) will face a legal action against it as part of the broad-based investigation.
In earnings news, design software maker Autodesk (ADSK) reported higher sales and earnings that topped forecasts, and said third-quarter sales will beat expectations. Shares gained 11.7% in unusually active Nasdaq trade.
Retailers Kohl's (KSS, Fortune 500), Nordstrom (JWN, Fortune 500), Abercrombie & Fitch (ANF) and J.C. Penney (JCP, Fortune 500) all reported earnings that were better than what analysts expected.
J.C. Penney warned that current-quarter results won't meet forecasts, but its shares gained anyway.
Mentor Graphics (MENT) slumped 26% after rival electronic-device software maker Cadence Design Systems (CDNS) said it was withdrawing its $1.6 billion hostile takeover bid due to it having trouble finding financing.
Market breadth was mixed. On the New York Stock Exchange, winners beat losers 8 to 7 on volume of 1.18 billion shares. On the Nasdaq, decliners edged advancers by a narrow margin as 1.79 billion shares traded hands.
Economic news: The August New York Empire State index, a regional read on manufacturing, showed a surprise jump in the month vs. forecasts for a further slowdown. The report, released by the New York Fed, rose to 2.8 from a reading of minus 4.9 in July; forecasts were for a decline to minus 5. Any reading that is positive shows growth, while a negative number shows contraction.
A separate report showed a rise in July capacity utilization that was in line with forecasts, as well as a rise in industrial production that was stronger than expected.
Another report showed the August consumer sentiment index from the University of Michigan rose to 61.7 from 61.2 in late July. Economists surveyed by Briefing.com thought it would improve to 62.
Other markets: COMEX gold for October delivery fell $22.30 to $788.40 an ounce.
In the bond market, Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.84% from 3.89% late Thursday.
Retail gas prices dropped overnight, extending a downward trend for a 29th day, according to a survey of gas station credit-card activity. (Full story.) 
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