Wall Street took comfort from a rise in oil prices and headed toward a higher open Monday, though investors remained cautious as Israel continued its attack on Gaza for a third day.
Oil rose above $40 a barrel Monday after the conflict between Israel and Gaza's Hamas rulers raised tensions in the Middle East. Light, sweet crude rose $2.52 to $40.23 a barrel in premarket electronic trading on the New York Mercantile Exchange.
The advance in oil was welcome for some investors who have worried that plunging prices signaled a long and severe recession. Oil has fallen more than $100 from its peak of $147.27 a barrel on July 11 as a slowing economy curbed demand. While Monday's advance came amid unease in the Middle East, the increase helped oil companies, with Exxon Mobil Corp. shares up more than 1 percent in the premarket session.
However, investors also digested a potential blow to dealmaking on Wall Street. On Sunday, Kuwait's government canceled its $17.4 billion K-Dow Petrochemicals joint venture with Dow Chemical Co., saying it was "very risky" because of the global financial crisis and low oil prices. The joint venture was set to begin Thursday.
Specialty chemicals maker Rohm & Haas Co. maintains that its proposed $15.3 billion takeover by Dow Chemical won't be affected by Dow's substantial loss of income from the venture. But investors punished shares in premarket trading, driving them down more than 20 percent to $50.61, compared with their Friday close of $63.56. Dow Chemical shares lost almost 9 percent.
Dow Jones industrial average futures rose 25, or 0.30 percent, to 8,497. Standard & Poor's 500 index futures rose 1.30, or 0.15 percent, to 870.20, while Nasdaq 100 index futures rose 4.00, or 0.34 percent, to 1,192.50.
Dave Rovelli, managing director of trading at brokerage Canaccord Adams, contends trading volume will be light until the new year as investors have largely closed the books on a terrible 2008. He said investors will be focusing on developments in the Middle East for any developments that could move markets.
"I think the market is up because everyone who wants to sell their positions for the year has. Most of their selling is done," he said. "No one is going to do anything until the new year."
"We've got to watch what's going on in the world," Rovelli said, referring to the developments with Israel and tensions between Pakistan and India. "If nothing major happens I think you're just going to see very light volume."
Bond prices also rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.13 percent from 2.14 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.02 percent from 0.01 percent late Friday.
The dollar was mixed against other major currencies, while gold prices edged higher.
Wall Street has largely written off the final three trading days of 2008, the worst year since Herbert Hoover was president. The Dow has fallen 36.2 percent, the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent. And the Standard & Poor's 500 index is set to record the biggest drop since its creation in 1957. The index of America's biggest companies is down 40.9 percent for the year.
Canaccord Adams' Rovelli said investors will be waiting to make big moves until after the Jan. 20 inauguration of President-elect Barack Obama. Wall Street is eager for details on his proposed stimulus package for the economy.
Also this week, investors will be looking for insight into how retailers fared after the weak Christmas selling season. Stores have slashed prices even further to entice post-holiday shoppers but with many consumers nervous about the economy they're reluctant to open their wallets. That's a troubling prospect for investors, since consumer spending accounts for more than two-thirds of U.S. economic activity.
On the Net: