Oil prices reached $65 a barrel Wednesday, aborting an early rally on Wall Street.
Analysts said investors had begun the day confident that the U.S. economy will stay strong, absorbing both higher short-term interest rates and rising gasoline prices. But the erosion of stocks' early advance -- the Dow Jones industrial average gained more than 100 points, extending a rally from Tuesday -- showed that many investors remained uneasy and inclined to sell when the price of oil goes up.
Crude reached $65 a barrel on the New York Mercantile Exchange before easing to a close at $64.90.
The price of oil "clearly is the headline, and that's probably causing the market malaise," said Jack A. Ablin of Harris Private Bank in Chicago.
The Dow fell 21.26, or 0.2 percent, to 10,594.41.
Broader stock indicators also fell. The Standard & Poor's 500-stock index fell 2.25, or 0.18 percent, to 1229.13, and the Nasdaq composite index dropped 16.38, or 0.75 percent, to 2157.81.
Investors, already uncomfortable with a series of refinery outages, apparently focused on the Energy Department's supply report, which showed a 2.1-million-barrel decrease in the U.S. gasoline supply.
They repeated a pattern from recent months, setting aside evidence of a strong economy to focus instead on the price of oil. The market initially was buoyed by confidence that Federal Reserve policymakers' decision Tuesday to raise short-term interest rates by a quarter percentage point, to 3.5 percent, wouldn't hurt the economy.
But investors turned around when oil prices resumed their climb despite new estimates from the Energy Department of slower growth in world oil demand.
Chevron rose $1.26, to $62.48.
Exxon Mobil was up 73 cents, to $59.90.
BP rose 94 cents, to $70.58.
Cisco Systems fell $1.36, to $18.25. The network-equipment maker reported a higher fourth-quarter profit but said sales in its first fiscal quarter were likely to increase 10 percent, less than analysts had been expecting.
New York Stock Exchange composite index rose 22.81, to 7528.39.
American Stock Exchange index rose 8.93, to 1640.53.
Russell 2000 index of smaller-company stocks fell 0.32, to 660.16.
NYSE: 2.2 billion shares, up from 1.94 billion on Tuesday. Advancers outnumbered decliners 7 to 5.
Nasdaq: 1.84 billion shares, up from 1.47 billion. Decliners outnumbered advancers 5 to 4.
Light, sweet crude oil for September delivery: $64.90, up $1.83.
Gold for current delivery: $436.50 a troy ounce, up from $434.20 on Tuesday.