US investors bounced between the threat of rising oil prices and positive economic indicators to drive their trades as the stock markets ended a punchy week virtually unchanged Friday. Promising data on jobs, production and core inflation could not overcome the spectre of higher oil prices driven by the fighting in Libya and the rise of pro-democracy groups in the oil-rich Gulf.
The Dow Jones Industrial Average finished 0.3 percent higher for the week at 12,169.88, while the broader S&P 500 added a bare 0.1 percent, to 1,321.15. The tech-heavy Nasdaq also gained just 0.1 percent, to 2,784.67. "On balance we have not gone anywhere," said Hugh Johnson of Hugh Johnson Advisors.
"It's been obviously a very volatile week... It reflects a great deal of uncertainty primarily about the Middle East and the impact of the price of oil on the US economy, on earnings." Stocks vacillated for three days as no news was concrete enough to drive the entire market.
While key indicators like auto sales and industrial production were strong, sentiment was mitigated by a warning on Tuesday from Federal Reserve chief Ben Bernanke. "Sustained rises in the prices of oil and other commodities would represent a threat both to economic growth and to overall price stability," he warned, after months of playing down the general threat of inflation.
On Thursday traders took note of a 5.2 percent drop in initial jobless claims in the last week of February and reports of a Venezuelan move to mediate the Libya conflict to send the main stock indices flying between 1.6 percent and 1.8 percent for the day. On Friday new data confirmed the jobs trend, with 192,000 new nonfarm jobs created in February - the best level in nine months - and the unemployment rate dropping a tenth point to 8.9 percent. But selling dominated on the final day of the week.
Injecting a note of reality after Thursday's rally, Patrick O'Hare of Briefing.com said: "Frankly, oil prices should have collapsed if there was a real sense peace in Libya was going to be achieved soon." "The question that is weighing on investors is where do we go from here, what will be the impact of the rise of the price of oil on inflaton and the economy for the month of march and beyond?" said Johnson.
Gregori Volokhine of Meeschaert Capital Markets called the market "binary," caught between different signals. "We anticipated the good figures that we finally did get, so we sell on the news," he said of Friday's downturn despite the strong new-jobs data. "If there is a problem, it is energy, that can affect a number of sectors of the economy," he said. "For the moment the market accepts the level of oil prices. But it hasn't taken into account that possibly the price will remain high for a long time."
Corporate news was mixed. Tech star Apple got a boost after founder Steve Jobs took a break from his sick leave and showed up to introduce the new iPad 2 on Wednesday. But that was not enough to recover to the level of the previous week, and Apple closed down 6.3 percent in the week. Boeing lost 0.7 percent in the week after its February 24 win of a $30 billion Air Force refuelling tanker contract, with higher oil prices weighing more on the short-term picture for sales.
Automakers also got little help from strong February sales reports, as the rising costs of production inputs, and of oil, raised questions about future margins and sales. Ford lost 4.3 percent, while GM was off 2.6 percent. Investors face a modest series of economic news releases next week, including the January trade deficit numbers on Thursday and February retail sales Friday.