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Volatility could be the name of the game on Wall Street this week as rising crude oil prices revive inflation fears and stock investors await congressional testimony from the Federal Reserve's chairman.
Investors hope the Fed's chief, Ben Bernanke, will speak plainly about how he sees the outlook for interest rates in the months ahead after data showing the economy is strong.
Oil climbed back above US$60 ($88) a barrel on Friday as Opec member Nigeria reduced exports and tensions grew between the United States and Iran over Iran's nuclear programme.
Temperatures below freezing persisted in much of the United States and spurred demand for heating oil and natural gas.
Stock trading this week could prove choppy if oil prices rose much further, analysts said.
"Crude and housing are the wild cards for this market," said Harry Clark, president and chief executive of Clark Capital Management Group in Philadelphia.
"If crude goes above US$60 to US$65 a barrel, that could give the market a correction."
Last week, stocks fell despite a spurt of deal news, solid profits from bellwethers such as Cisco Systems and a sparkling market debut by Fortress Investment Group.
The Dow Jones industrial average fell 0.57 per cent, the Standard & Poor's 500 index slipped 0.71 per cent and the Nasdaq Composite Index dropped 0.65 per cent.
The Government was due to release the US Producer Price Index and housing starts for January at the weekend.
The overall PPI, which measures wholesale prices, was expected to drop 0.5 per cent, after a 0.9 per cent rise in December, said economists polled by Reuters.
Core PPI, excluding volatile food and energy prices, is forecast to gain 0.2 percent in January, matching December's increase.
On Friday, US crude oil for March delivery jumped to US$60.80 and settled at US$59.89 a barrel. For the week, oil was up 1.5 per cent on the New York Mercantile Exchange.
While the increase in crude oil prices lifted shares of energy companies such as Exxon Mobil, it hurt the broader market as investors began to fear the prospect of runaway inflation.
Events in Opec member Iran, locked in a nuclear dispute with the West, have the potential to sway the US stock market.
- REUTERS
