Stocks Stabilize as Oil Recedes

News on several fronts spurred the decline in the oil market. Russia’s Yukos was granted permission to access frozen accounts in order to keep exports flowing, and the president of OPEC said that the cartel stood ready to pump more oil to steady prices. Also, an Energy Department report showed that U.S. gasoline reserves are higher than previously believed.

Crude oil futures fell more than 3 percent in New York trading, closing below $43 after spiking to 21-year highs in the previous two days.

Many airlines stocks moved higher on the belief that lower fuel prices would boost their bottom lines.

Yukos, OPEC and American Drivers

Yukos accounts had been frozen by government officials seeking to collect US$3.4 billion in back taxes. The government has decided to allow the company to access accounts used to fund current operations. Yukos claims that the tax bill might force it into bankruptcy, while the government says it might extend the company's two-month deadline to settle the bill.

OPEC announced that it had the immediate ability to begin pumping more then one million extra barrels a day. There had been fears that the cartel was struggling to meet strong worldwide demand and had no capacity to pump more oil.

Analysts had expected U.S gasoline stocks to fall as drivers hit the highways for summer vacations. But in its weekly report, the U.S. Energy Information Agency said gasoline stocks rose 2.4 million barrels last week, an indication of weaker-than-expected demand.

Modest Gains

Meanwhile, two new economic reports carried at least moderately good news. The Institute of Supply Management (ISM) said its nonmanufacturing index rose to 64.8 percent in July from 59.5 percent in June, well ahead of forecasts. However, the index did show a decline in its employment component.

This index measures the service sector, a large majority of overall U.S. economic activity. The ISM report on manufacturing, released earlier, also showed economic growth for July.

The Commerce Department separately said factory orders rose 0.7 percent in June, slightly exceeding predictions and marking the fourth gain in the past five months. In addition, the May figure was revised slightly higher.

Orders for durable goods -- expensive items expected to last three years or more -- were up 0.9 percent in June, reversing a drop of the same percentage a month before. Demand for electrical equipment and military airplanes helped boost the durable goods numbers, but these gains were offset somewhat by declines in order for automobiles and computers.

Stopped the Bleeding

Overall, the day's news was enough to halt a sharp skid in stocks, but it proved not strong enough to lift all the averages into positive territory.

The Dow managed to climb 6.27 points to 10,126.51, and the Nasdaq fell 4.36 points to close at 1,855.06. The S&P 500 was also lower by just over a point at 1,098.63.

Weighing on the Nasdaq was networking equipment maker Ciena (Nasdaq: CIEN) , which saw its shares drop as much as 24 percent to an all-time low after a third-quarter revenue warning.

The firm, which makes fiber-optic equipment, cited weak demand from telecom customers, including a slowdown in orders related to new DSL equipment, a major part of Ciena's business.