Stocks fall, oil rises as Egypt's turmoil roils markets

Crude oil nearly hits $100 a barrel in New York as Egypt's political standoff gets more dangerous. Stocks tumble, despite strong June auto sales.

By Charley Blaine 

 

Stocks surged Tuesday for a second day in a row in the morning but faded in the afternoon -- as a potentially larger story emerged: rising oil prices.

Crude oil (-CL) nearly hit $100 in New York as turmoil grew in Egypt. How that story plays out may affect global markets over the next few days.

The irony of the gains for light sweet crude in New York -- as well as Brent crude in London -- is that those price increases have come as U.S. pump prices have fallen for the last 20 days. The big question is if the declines will continue. A sudden and steep increase in pump prices will hurt consumers both financially and psychologically.

The  result of the TV pictures of millions protesting in Cairo. as a power struggle between Egyptian president Mohammed Morsi and the Egyptian army worsened. was to gut a decent stock market rally, but stocks did rebound a bit from afternoon lows.

The Dow Jones industrials ($INDU -0.28%) had been been up as many as 140 points but closed down 43 points. The loss could have been worse. The Dow was down as many as 104 points around 2:35 p.m. ET.

The Standard & Poor's 500 Index ($INX -0.05%) fell 1 point to 1,614. But the ride to that level included a gain of as many as 18 points and a swing to a decline of 8 points.

The Nasdaq Composite Index ($COMPX -0.03%) was off 1 point as well, after seeing a 20-point gain slide briefly to a 19-point loss. 

And that was due to the worry about Egypt and then hope things might turn out all right. In addition, there was terrific news on auto sales. Automakers had their best month in some six years, with June sales hitting an annualized sales rate of 16 million units. Growth in pickup sales was a big reason for the sales gains.

Light sweet crude oil in New York settled at $99.60 a barrel, up $1.61 from Monday and up $3.04 a barrel this week. It was trading at $99.72 at 6:40 p.m. Brent crude, which has a outsized influenced on U.S. retail gasoline prices added $1 to $104 a gallon.

Despite those increases, there's been that decline in gasoline prices. According to AAA's Daily Fuel Gauge Report, the average price of regular unleaded gas has fallen from $3.632 a gallon on June 13 to $3.478 on Tuesday, a decline of 15.4 cents, or 4.2%.

The decline has been big enough that only Hawaiian and Alaskan drivers are dealing with prices above $4 a gallon and may be a strong reason that consumer confidence has been rising recently.

But that confidence may become damaged by the rising tensions in Egypt between Morsi and his Islamist supporters, and young people and the army. The army demanded Morsi patch relations with his opponents by Wednesday --  or the army would impose its own resolution. Late Tuesday, Morsi defiantly refused to resign.

The risk of Egypt is not its production, which is relatively small. A big risk is what happens if the Suez Canal shuts down, disrupting some shipments to Europe. And an even bigger risk is if the turmoil in Egypt affects oil production elsewhere in the Middle East.

Here in the U.S., we will find out just how big oil reserves are elsewhere, particularly from all those shale deposits that have been boosting U.S. oil production in the last few years after years of decline.

The growth in crude production is driving the biggest drop in crude imports in two decades. Another casualty: Rates for the oil tankers most reliant on the shipments are the weakest at least 16 years, Seeking Alpha noted today.

Should pump prices start to move higher and stay higher for an extended period of time, you could see those nice auto sales get hurt.

Stocks, meanwhile, we face what should be a quiet day on Wednesday -- because markets close at 1 p.m. ET. Volume already has moved lower as Wall Street heads to the beach or the mountains for an extended holiday weekend.

There are some economic reports that could moved markets:

• The ADP National Employment Index, which tracks private employment trends.
• The monthly report on big layoffs from Challenger Gray Christmas
• The Institute for Supply Management's monthly report on the non-manufacturing report.

All will shape how Wall Street views Friday's big jobs report. The consensus estimate has been for a gain of 160,000 payroll jobs and an unemployment rate at 7.5%. Bright Media, which runs the Bright.com website, is estimating a gain of 172,000, down slightly from the government's first May estimate of 175,000 jobs created.

Twelve of the 30 Dow stocks were higher, along with 204 stocks in the S&P 500 and 40 stocks in the Nasdaq-100 Index ($NDX +0.08%). The index finished up 2 points to 2,930. Apple (AAPL +2.27%) helped, rising $9.27 to $418.49.