Oil Slides as Stocks Post a Mixed Showing

Updated from 1:16 p.m. EDT

U.S. stocks were mixed in an erratic session Tuesday as traders digested hawkish comments from the Federal Reserve chief and a plunge in China's market alongside an encouraging development in the blistering oil market.

The Dow Jones Industrial Average broke from wobbly early action to tack on 50 points, or 0.4%, to 12,330 this afternoon, getting particularly strong support from financial components Citigroup (C Quote), JPMorgan Chase (JPM Quote) and AIG (AIG Quote).

Broader indices were in better shape than they were in the morning, but both continued to trade near the flat line. The S&P 500 was up less than a point at 1363 and the Nasdaq Composite down marginally at 2459.

Stocks saw their fortunes improve a bit after news broke that Saudi Arabia's oil output was boosted by nearly 500,000 barrels a day this quarter at 9.54 million, according to CNBC. The network cited sources in the Saudi Oil Ministry.

Crude, which earlier soared to a new high just shy of the $138 mark, reversed to slide $2.52 at $131.83 a barrel.

"There's been a pretty good negative correlation between oil and the market," said Kim Caughey. "So this causes people to breathe a sigh of relief, maybe feel a little bit better, and press the button to buy."

Equity measures struggled to get very far into positive territory, however, as investors dealt with other pressures.

"The fact that [Fed chairman] Ben Bernanke and other Fed members are continually talking about the risks of higher inflation and hinting that the Fed is going to have to raise interest rates to combat inflation, I think, is really weighing heavily on stocks," said Peter Cardillo, chief market economist with Avalon Partners.