March 28, 2012 / 10:19 AM / in 5 years

Stocks follow oil lower on reserve talks

A man refuels his car as gas prices are reflected into the windows of the United Oil gas station in Los Angeles, California March 24, 2012. REUTERS/Bret Hartman

NEW YORK (Reuters) - Oil prices fell on Wednesday as the U.S. and some European governments mulled the release of strategic oil reserves, while commodity-related shares weighed on global equities.

U.S. stocks closed weaker, though far from the day’s lows, in the wake of economic data that was slightly below expectations.

France, the United States and Britain are in talks about the possible release of strategic oil stocks to help push fuel prices lower, French ministers said, only weeks ahead of the country’s presidential election. Purchasing power is among voters’ top concerns.

Further pressuring prices, U.S. crude oil inventories posted the largest weekly build since July 2010, according to data from the U.S. Energy Information Administration.

Brent crude, up more than 15 percent this quarter, settled 1.1 percent lower at $124.16 per barrel, while U.S. crude futures settled down 1.8 percent at $105.41. U.S. crude is up about 6 percent so far this year.

The S&P 500 retreated from 4-year highs posted earlier this week but managed to hold the 1,400 level. U.S. and European equity benchmarks are still on track to post their best first quarter in 14 years.

“Investor anxiety has been rising due to the prolonged and significant rally, and we had a catalyst event in the collapse of energy stocks,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“It’s a combination of investor jitters, given how far the rally has come, and technical levels that we are testing.”

He said holding the 1,400 level on the S&P 500 was an indication that the market’s trend upward was still in place.

The Dow Jones industrial average .DJI fell 71.52 points, or 0.54 percent, to 13,126.21. The Standard & Poor’s 500 Index .SPX was down 6.98 points, or 0.49 percent, at 1,405.54. The Nasdaq Composite Index .IXIC was down 15.39 points, or 0.49 percent, at 3,104.96.

MSCI’s main global stock index .MIWD00000PUS fell 0.7 percent, retreating from an eight-month high hit Tuesday. The pan-European FTSEurofirst 300 .FTEU3 index closed down 1 percent.

The yen rose 0.4 percent against the U.S. dollar, lifted by seasonal flows from Japanese exporters buying at the end of their fiscal year. Any gains could be temporary, though, as the Bank of Japan is determined to keep monetary policy ultra loose. <USD/>

“In general as you get closer to the end of the month you probably see a little more demand for Japanese yen,” said Kathy Lien, director of FX research at GFT in Jersey City, who added that much of the repatriation activity already happened last week. “I don’t expect repatriation to take dollar/yen lower than 82,” she said.

U.S. Treasures traded mostly flat on the day, weighed down by tepid demand at the Treasury’s $35 billion sale of five-year notes.

The benchmark 10-year U.S. Treasury note was down 5/32, the yield at 2.205 percent.

New orders for long-lasting U.S. factory goods rose less than expected in February and a gauge of future business investment also fell short of forecasts, casting a shadow on the manufacturing sector’s support of the recovery.

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