Crude futures fall near three-month low. Stocks rebounded a day after their steep tumble, as a drop in oil prices and a rise in consumer confidence gave investors hope for a possible letup in Americans' financial woes. The Dow Jones industrial average rose more than 200 points.
Crude oil prices sank by $2.99 to $121.74 a barrel on the New York Mercantile Exchange, extending their two-week-long retreat from record highs above $147.
The prospect of lower energy costs for U.S. consumers, along with a modest uptick in the Conference Board's July index of consumer confidence to 51.9 from 51 in June, came as welcome news to investors. Consumer spending accounts for more than two-thirds of U.S. economic activity.
A bounce was also to be expected after the Dow lost nearly 240 points Monday on worries about the sagging financial sector. Wall Street remains concerned about growing losses related to the credit crisis -- especially after Merrill Lynch & Co. announced that it was writing down another $5.7 billion and selling assets tied to risky debt at a steep discount to Lone Star Funds, which invests in distressed debt.
Bond prices fell after rallying Monday as investors rushed to the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.08 percent from 4.01 percent late Monday.
The dollar was mostly higher against other major currencies, while gold prices fell. Merrill, which plans to issue new stock to raise $8.5 billion, said the latest write-downs are tied to additional losses on the sale of mortgage securities and other instruments. The disclosure was a setback for investors hoping that financial companies were close to putting the credit crisis behind them.
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