updated 1/10/2007 9:53:41 AM ET 2007-01-10T14:53:41

Wall Street was mixed in an erratic session Tuesday as investors, uneasy about approaching earnings reports, debated whether the drop in oil prices would eventually bring stocks down as well.

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Investors had already lost some of their recent ebullience going into the earnings season, worried that 18 straight quarters of double-digit growth in Standard & Poor’s 500 companies might be ending. The market was skittish after Sprint Nextel Inc. warned that its 2007 results will miss analyst projections, and after another half-dozen companies warned Monday that fourth-quarter results will come up short.

But investors also wrestled with the positive and negative effects of a continued slide in oil prices. Warm weather in the Northeast has weakened demand for energy, and at one point drove a barrel of oil to below $54 a barrel.

Not only did this bring shares of major oil and gasoline companies to two-month lows, but caused institutional investors like hedge funds to unwind their positions, analysts said. Some big investors might be taking cash off the table on concern demand for crude might not re-emerge in the near term.

“There’s a huge financial position on the point of hedge funds and other financial players having positions in oil futures,” said Jason Maxwell, a managing director with Trust Company of the West. “People might be unwinding that position because there’s so much supply that its dangers that oil is pegged higher six months from now.”

According to preliminary calculations, the Dow fell 6.89, or 0.06 percent, to 12,416.60. Meanwhile, the broader S&P 500 index dropped 0.73, or 0.05 percent, to 1,412.11.

Technology stocks went against the overall market, with the Nasdaq composite index rising 5.63, or 0.23 percent, to 2,443.83. Leading the composite was Apple Computer Inc., which unveiled its long-anticipated iPhone.

While there were plenty of fluctuations in stocks, fixed-income trading remained range bound with little economic news for traders to act on. Bond prices edged lower, with the yield on the benchmark 10-year Treasury up to 4.66 percent from 4.65 percent on Monday.

The dollar was higher against other major currencies, and gold prices moved up along with it. Lower oil prices have made currencies and gold more attractive to investors looking for a safer place to stow cash.

The continued drop in oil prices was originally one of the market’s biggest motivators, sending shares of transports and retailers higher. Investors bet lower prices at the pump would cause consumers to spend more in stores, and trucking companies would spend less to fuel up their fleets.

But that decline in turned sent shares of major oil and gasoline companies sliding as lower prices could cut into profits. A barrel of light sweet crude fell 45 cents to $55.64 on the New York Mercantile Exchange after being down almost $2 earlier in the session.

Dow component Exxon Mobil Corp. fell 56 cents to $72.09. BP PLC dropped $1.85, or 2.9 percent, to $62.44 after it announced a lower output and narrowing margins. Chevron Corp. fell 82 cents to $70.63.

Todd Salamone, senior vice president of research at Schaeffer’s Investment Research in Cincinnati, said the drop in oil also indicates some technical trading. He said the flip-flop nature of the session has become the norm in the first few weeks of trading in 2007 as investors adjust their portfolios for the year.

“There is no strong reason to commit to buying stocks right now, and no strong reason to commit to selling them either,” he said. “This is a microcosm seen since early December with a trading range mentality.”

What now has now captured investor focus is the upcoming earnings season, which unofficially kicked off Tuesday after the closing bell when Alcoa Inc. posted results. The world’s largest aluminum producer said fourth-quarter profit rose 60 percent to beat expectations.

Alcoa shares rose 4 cents to $28.52.

The results were seen as a positive sign of U.S. manufacturing and corporate health. It also helped offset profit warnings from a number of companies in the past two trading sessions.

Sprint Nextel warned 2007 will miss expectations. The wireless company was also the target of several analyst downgrades, causing shares to drop $2.19, or 11.2 percent, to $17.45.

One sector lending some support to the market was technology issues given news coming out of the annual Macworld Expo in San Francisco and Consumer Electronics Show in Las Vegas. Apple shares rose $7.10, or 8.3 percent, to $92.57 after Chief Executive Steve Jobs announced production of its new iPhone. The new product combines a mobile telephone with its iPod music device.

Advancers outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.70 billion shares.

The Russell 2000 index of smaller companies fell 1.34, or 0.17 percent, to 778.33.

Overseas, Japan’s Nikkei stock average closed up 0.86 percent after being closed Monday due to a public holiday. At the close, Britain’s FTSE 100 was up 0.03 percent, Germany’s DAX index rose 0.10 percent, and France’s CAC-40 added 0.26 percent.

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