Market remains under pressure amid higher oil prices, credit market worries and bet by Fed chief that more housing weakness is ahead.


October 16 2007: 12:08 PM EDT


Stocks moved off their lows but remained in the red as sky-high oil prices, credit market concerns and troubling comments about the housing sector by Federal Reserve Chairman Ben Bernanke worried investors.

The Dow Jones industrial average (Charts) fell nearly 0.4 percent with 2-1/2 hours into the trading session.

The broader S&P 500 index (Charts) lost 0.4 percent, while the tech-fueled Nasdaq (Charts) eased 0.1 percent.

Pressuring stocks were comments delivered Monday night by Bernanke, who said the Fed's September rate cut has shown signs of success, but made no indication if the central bank would continue to lower rates.

He also issued a warning to Wall Street, saying the central bank can't "insulate investors from risk" and said weakness in the housing market would likely drag on growth through early next year.

Higher oil prices also troubled investors as crude prices jumped above $87 a barrel. Light, sweet crude for November surged by $1.61 to $87.73 a barrel, after closing at a record high Monday. Earlier Tuesday, crude prices reached a new trading high of $87.97 a barrel.

And credit market concerns began to surface again after a group of Wall Street banks announced Monday they would launch a debt rescue fund which would purchase troubled mortgage-backed securities to help prevent the subprime crisis from spreading.

"The combination of a drag on the economy from housing and changing credit market conditions and a drag from higher oil prices have investors very worried," said Hugh Johnson, chairman of asset management company Johnson Illington Advisors.

"This comes at a time when third-quarter earnings are anything but exciting or good."

While corporate earnings have pretty lackluster so far, those companies reporting results Tuesday delivered some mixed results

Dow Jones industrial component Johnson & Johnson (Charts, Fortune 500) announced a decline in profit, but higher revenue. The company also raised its earnings guidance for the full year 2007.

Wells Fargo (Charts, Fortune 500) reported slightly higher earnings despite taking a writedown totaling nearly $500 million over mortgages that have lost value.

Air carrier Delta Charts, Fortune 500) reported a jump in quarterly earnings, topping expectations, helped by higher sales.

And wireless networks maker LM Ericsson (Charts) warned that its third-quarter sales, operating income and cash flow all would be lower than expected. Shares of the LM Ericsson tumbled 24 percent in midday trade on the news.

In other earnings news,Tech leaders Yahoo (Charts, Fortune 500), Intel Charts, Fortune 500) and IBM (Charts, Fortune 500) are all set to deliver their quarterly results after the closing bell.

In other corporate news, shares of newspaper publisher E.W. Scripps (Charts) surged nearly 8 percent in morning trade after the company said it would split into two companies, with its new firm controlling its cable TV and Internet holdings.

Homebuilder D.R. Horton said Tuesday its orders tumbled 39 percent during the fourth quarter, hurt by the deepening housing slump. D.R. Horton Charts, Fortune 500) shares slipped 2.7 percent on the news.

Shares of Bear Stearns (Charts, Fortune 500) were nearly 2 percent higher following reports that China Citric Bank is bidding for a stake in the battered Wall Street bank.

On the economic front, the National Association of Home Builder's monthly survey of builder confidence is due to be released at 1 p.m. ET. That index is expected to fall to an all-time low in its latest reading.

In global trade, markets in Asia finished the session lower, and European stocks retreated in late afternoon trading. The dollar was higher against the euro but lower versus the yen.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.65 percent from 4.67 percent late Monday. Bond prices and yields move in opposite directions.

COMEX gold prices pared some gains after hitting a 28-year high, as prices rose 90 cents to $763.10 an ounce.

By Money Update