Oil prices finally broke today, enabling stocks to climb to their biggest weekly gain in four months.
Reacting to reports of reduced fighting in Iraq, crude oil fell almost a dollar a barrel, but only after hitting another new high of $49.40 a barrel at the New York Mercantile Exchange, which has temporarily replaced the New York Stock Exchange as the city's most-watched market.
Oil prices have hit record highs every day but one this month, and did it again today. After popping to $49.40 a barrel in morning trading, crude futures closed at $47.75 a barrel, down 95 cents from the previous day.
Although stories out of Iraq were inconsistent and confused, oil traders seemed persuaded that reports of reduced fighting in Najaf lowered the threat of more attacks on oil facilities by followers of radical cleric Moqtada Sadr.
Today's retreat still left crude oil prices 55 percent higher than they were a year ago, which growing numbers of economists believe will hamper economic growth. Today Lehman Brothers became the latest Wall Street firm to cut its economic forecast. The latest Lehman forecast is for 4.3 percent growth this year -- down 0.1 from previous estimates -- and 3.3 percent next year, down from 3.7 percent.
Higher oil prices act like a tax on consumers and businesses, said economist Joseph Abate, of Lehman Brothers Global Economics. The longer they remain high, he said, the more they hurt. "The more it builds into business and household psychologies, the bigger the effect it will have on growth," he explained.
Stock traders paid more attention to Google than to oil prices. On their second day of trading, Google shares opened more than a dollar higher and continued to climb, closing up $7.97 at $108.31.
Technology stocks followed a similar trajectory. The Nasdaq Stock Market composite index gained 18 points, closing at 1,838.01. The Dow Jones industrial average advanced 69 points to 10,110.14. The Standard & Poor's 500 stock index moved up 7 points to 1,098.35.
Climbing four of the past five days, the Dow gained 285 points for the week, a 2.8 percent advance. The Nasdaq composite gained 81 points of 4.6. The S&P 500 gained 34 points or 3.1 percent.