updated 5/20/2004 8:26:08 AM ET 2004-05-20T12:26:08

Wall Street’s rally sputtered to a stop Wednesday as rising oil prices deflated the market’s enthusiasm over strong earnings from technology bellwethers Hewlett-Packard Co. and Applied Materials Inc. Prices ended mixed, and the Dow Jones industrials gave up a triple-digit advance and closed with a loss.

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Investor sentiment seemed to swing toward embracing good news as a buying opportunity, rather than selling on the news for a quick profit as was the case over the past few months. But as oil prices rose and stocks plummeted in late trading, it was clear that Wall Street remained susceptible to any smallest negative news.

Benchmark crude oil traded at a record-high $41.50 per barrel in the futures market, up 96 cents and reigniting lingering fears of inflation in the markets.

“We’ve had strong earnings and have seen oil prices come down a bit over the past few days,” said Peter Cardillo, chief strategist and senior vice president for S.W. Bach & Co. “But we need those trends to continue in order to sustain any kind of rally.”

The Dow dropped 30.80 points, or 0.3 percent, to 9,937.71. The index had been up 123.99 points earlier in the session.

Broader stock indicators were narrowly mixed. The tech-focused Nasdaq composite index gained just 0.35 points, or 0.02 percent, to close at 1,898.17, while the Standard & Poor’s 500-stock index closed down 2.81 points, or 0.3 percent, at 1,088.68.

Few market-moving catalysts remain now that earnings season is winding down, and another geopolitical incident — such as Monday’s assassination of the Iraqi Governing Council president — could see stocks falling to new near-term lows. Even without major events to move the markets, maintaining a rally will be difficult.

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“The markets will really be stuck in a range for a while,” said Russ Koesterich, U.S. equity strategist at State Street Corp. “I think you break of the range when you get some feeling from the Fed that they don’t see a problem with inflation. That could be a while — even after the elections.”

However, some investors remained bullish. If the Federal Reserve raises benchmark interest rates in June, as is widely expected, the removal of uncertainty for the market could create a buying opportunity — as long as oil prices can be brought under control and overseas events cooperate.

“If the Fed moves in June with a small rate hike and a very benign statement, and we see oil decline under $40 (per barrel), the combination of those two is going to be very powerful for the market,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “There’s money to be made between the first Fed rate hike and the election, even with some volatility that we’re sure to find there.”

Dow component Hewlett-Packard posted a 34 percent gain in quarterly profits after Monday’s session, matching Wall Street expectations. The computer maker, which boosted its sales outlook for the second half of the year despite intense competition, rose 72 cents to $20.55.

Applied Materials lost 21 cents to $18.64 after spending much of the session in positive territory. The chip manufacturing equipment maker announced an 82 percent surge in sales from a year ago and beat analysts’ estimates by 3 cents per share.

Losses were pared at Goodyear Tire & Rubber Co., which announced its fourth-quarter profits two months late due to accounting problems in its European divisions. Goodyear, which saw sales increase 11 percent, was up 40 cents at $8.56.

Bookseller Borders Group Inc. beat Wall Street estimates by 2 cents per share on a 10.6 increase in sales from a year ago. However, Prudential downgraded both Borders and rival Barnes & Noble Inc. due to concerns over the coming year’s sales outlook. Borders lost 37 cents to $22.33, while Barnes & Noble fell 77 cents to $28.31.

Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume was moderate. The Russell 2000 index of smaller companies fell 1.70 points, or 0.3 percent, to 540.86.

Overseas, Japan’s Nikkei stock average rose 2.4 percent. Britain’s FTSE 100 closed up 1.2 percent, France’s CAC-40 gained 2.1 percent for the session and Germany’s DAX index rose 2.2 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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