NEW YORK (CNN/Money) -
The Nasdaq gained and the broader market drifted Monday, with investors again worried about inflation as crude oil prices hit new all-time highs.
The Nasdaq composite (up 10.89 to 1922.98, Charts) added 0.6 percent and the Standard & Poor's 500 (unchanged at 1093.56, Charts) index added 0.15 percent.
The Dow Jones industrial average (down 8.31 to 9958.43, Charts) was little changed, weighed down by Altria, which tumbled after a legal setback.
Stocks rose at the open after Saudi Arabia agreed -- at an informal OPEC meeting this weekend -- that it would increase oil output by 28 percent starting next month and is prepared to raise it more in the future.
However, the reassurance did little to stabilize the price of oil on the session, with further output hikes needed to meet global demand, the Group of Seven said this weekend, and other analysts said Monday.
NYMEX light sweet crude oil futures gained $1.79 to settle at $41.72 a barrel Monday afternoon, an all-time closing high that took out last Monday's previous all-time closing high.
Worries about higher oil prices and other inflationary factors have pressured markets for some time. Investors worry that higher inflation and a rise in interest rates would hurt the economic recovery, corporate profits and ultimately stock valuations.
These concerns -- in conjunction with worries about Iraq -- have kept the major indexes flat to lower for the past four weeks.
Brian Bensch, investment manager at Melhado, Flynn & Associates, said that the market had been looking like it would bottom recently.
"The fact that we haven't been able to rally in a meaningful way makes me worried that we are going to need to go lower," Bensch said. "There's still no catalyst to move us. Earnings and the economic news have been good, but oil is higher than anyone was expecting, and there's a sense of a lack of success in Iraq."
President Bush will seek to clarify the Bush administration's position on Iraq and how the new government will function in a speech this evening at the Army War College in Carlisle, Pennsylvania. The speech is scheduled to start at 8 p.m. ET and should last around 30 minutes. It will be televised on cable news networks.
If President Bush were to take a new stance, or offer a clear exit strategy for the U.S. from Iraq, that would help markets, Bensch said. But if the president should offer commentary that doesn't vary from previous speeches, the market is unlikely to react.
"The market wants a summer rally, but until oil prices come down, and there is some progress with all the geopolitical issues, that's going to be tough," said Peter Green, a market analyst at MKM Partners.
Also apt to influence trade Tuesday: a pair of economic reports due just after the open. Consumer confidence is expected to have risen to 94.0 in May from 92.9 in April. Existing home sales are forecast to have fallen to a 6.45 million unit annual rate in April from a 6.48 million unit annual rate in March.
Altria and other movers
Altria, the parent of Philip Morris, fell close to 9 percent after the tobacco industry was handed a legal setback. A federal judge declined to limit the $280 billion worth of fines the government is seeking for a trial that starts in September. The news also sent R.J. Reynolds (RJR: down $3.53 to $53.73, Research, Estimates) down more than 4 percent.
Among the Dow stocks that managed to hold on to their gains, Alcoa (AA: up $0.72 to $30.20, Research, Estimates) advanced 2.4 percent following a Wall Street Journal report that it plans to open a $1 billion smelting facility in the Caribbean nation of Trinidad.
In other news, Merrill Lynch upgraded Dow stock Caterpillar (CAT: up $0.97 to $74.00, Research, Estimates) to "buy" from "neutral." The brokerage cited evidence that certain key end markets are starting to recover, as well as the stock's attractive valuation. The stock rose 1.3 percent.
A number of technology issues gained as well, including Applied Materials (AMAT: up $0.34 to $18.72, Research, Estimates), up 1.8 percent, and Yahoo! (YHOO: up $0.88 to $29.43, Research, Estimates), up 3 percent.
Chip gear maker Applied Micro Circuits (AMCC: up $0.49 to $5.09, Research, Estimates) rallied 10.6 percent after it received a positive mention in a Barron's article over the weekend.
Among other Nasdaq movers, shares of NeighborCare (NCRX: up $10.24 to $27.91, Research, Estimates), which provides prescription drugs to nursing homes, rallied 58 percent after receiving an unsolicited buyout offer from rival Omnicare (OCR: up $1.45 to $40.60, Research, Estimates) for $1.35 billion in cash.
Shares of Vicuron Pharmaceuticals (MICU: down $8.86 to $13.04, Research, Estimates) fell 40.5 percent after U.S. regulators said they wouldn't grant approval for Vicuron's treatment of an infection of the esophagus. The company could still potentially win approval, the authorities said, pending additional studies or results from its in-progress late stage trial of the drug's effectiveness. Following the disclosure, Credit Suisse First Boston downgraded the stock to "underperform" from "outperform."
Market breadth was mixed. On the New York Stock Exchange, where 1.2 billion shares traded, advancers beat decliners by more than two to one. On the Nasdaq, gainers beat losers by more than three to two as 1.4 billion shares changed hands.
Treasury prices were higher. The 10-year note rose 5/32 of a point for a yield of 4.73 percent, down from 4.76 percent late Friday. Treasury prices and yields move in opposite directions. The dollar fell versus the euro and gained versus the yen.
COMEX gold settled at $385.70 an ounce.
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