Stocks turn up despite consumer survey, inflation worries

The Reuters/University of Michigan consumer sentiment index fell to 62.6 for April from 69.5 a month earlier. It was the lowest reading since the early 1980s, as Americans contended with rising energy and food prices. Consumers' flagging mood is worrisome for Wall Street, because consumer spending accounts for about 70 percent of U.S. economic activity.

Investors were also unimpressed by Microsoft's forecast for the current quarter and its revenue figures.

Oil prices, meanwhile, jumped on a series of troubling events overseas, including word from the U.S. Navy that a ship under contract with the Navy fired flares and warning shots at two small boats of unknown origin in the Persian Gulf. Oil was up earlier following an attack on a pipeline in Nigeria and a looming refinery strike in Scotland; light, sweet crude shot as high as $119.50 a barrel on the New York Mercantile Exchange before falling back a bit, to settle to $118.52, up $2.46.

Oil's advance raises the specter of higher inflation, which could be a further deterrent to consumer spending.

"It looked like the market wanted to rally this morning," said Neil Massa, equity trader at John Hancock Funds, adding that news of the incident in the Gulf unnerved investors.

"That's what drove crude up and that's what's taking us down," he said, referring to the stock market. "I think it really shows how easily the energy market can go back up again."

In late afternooon trading, the Dow gained 15.23, or 0.12 percent, to 12,864.18 after earlier being down more than 100 points.

Broader stock indicators were mixed. The Standard & Poor's 500 index gained 5.58, or 0.40 percent, to 1,394.40, while the Nasdaq composite index, depressed by Microsoft, fell 10.76, or 0.44 percent, to 2,418.76.

Advancing issues narrowly outpaced decliners on the New York Stock Exchange, where volume came to 918.2 million shares.