What a Week: Crude Action Matters

Is the oil bugaboo back? At the end of last summer it seemed like a different oil-producing nation was undergoing a coup, natural disaster, de-privatization or terror attacks every week, and the price of crude shot up to $50 in August and then over $55 a barrel in October. That dragged down technology and consumer-sensitive stocks while giving the energy patch a boost.

Oil's machinations have correlated pretty closely with the Nasdaq Composite over the past year. In the fourth quarter, as oil peaked and fell all the way down to $40 on Dec. 13, the Nasdaq staged its grand rally.

But since then, crude has been rising again, albeit in fits and starts. From Dec. 31 through Jan. 18, oil ran up more than 15% to as high as $49.50, stayed in a tight range until Jan. 27, and then dropped to a low of $44.78 by Feb. 8. The Nasdaq Composite lost almost 150 points through Jan. 24, then recovered almost 100 through Feb. 8. Oil's minirally this week coincided with the Nasdaq's weakness on Wednesday and Thursday, sessions that condemned the tech-laden index to lag its blue-chip counterparts this week.

For the week, the Dow Jones Industrial Average gained 0.8% to 10,796.01, the S&P 500 added 0.2% to 1205.30 and, despite Friday's surge behind strength in Apple Computer (AAPL) and Novellus Systems (NVLS), the Comp ended the week down 0.5% to 2076.66. Still, the Dow is now in the black for 2005 and all three benchmarks are 3% to 5% above their lows for the year, which were back on Jan. 24.

Obviously, there are many other factors beside crude at play in helping turn the markets around from January's swoon, without even getting into the effects of company-specific earnings reports and analysts recommendations. AIG (AIG), Toll Brothers (TOL) and Aetna (AET) posted above-expected results, to name just a few that have drawn renewed interest from buyers.