Markets Give Back Early Gains, Start September Lower

September 2, 2008 5:24 p.m. EST

New York, NY (AHN) - U.S. markets opened higher Tuesday sparked by sliding oil prices. However, were unable to hold gains as an afternoon sell off pushed all three major indices negative on Tuesday.

The major indices all traded up by more than 1.6 percent in the morning hours before selling off. With Hurricane Gustav not causing any major problems, oil was trading down around $107 a barrel when the markets opened Tuesday, a main catalyst for early market gains. However, after trading down to $105.46, the commodity rallied to cut it's lose nearly in half, settling at $109.71 a barrel, down $5.75 on the session.

The Dow Jones Industrial average finished Tuesday down 26 points or 0.2 percent. Gainers actually outpaced decliners on the Dow 19 to 11, but big losses in commodity related names, Alcoa, down 5.2 percent and Chevron, down 3.5 percent more than offset the difference.

The S&P 500 fell 5 points or 0.4 percent. With oil down, the energy and materials sector provided the biggest drag on the index, down 4.6 percent and 2.56 percent, respectively.

On the flipside, airlines benefitted from lower oil prices with a 6.6 percent advance. Automakers were strong as well, up 3.1 percent.

The Nasdaq Composite was the weakest on a percentage basis, down 18 points or 0.8 percent. The big-cap tech names weighed on the index with the Nasdaq 100 losing 1.2 percent on the session. Joy Global, down 7.45 percent was one of the index's biggest laggards.

In economic news, July construction spending fell 0.6 percent. The result was short of economists' expectations of a 0.4 percent decline.

The Institute of Supply Management also released there ISM index data for August, the reading fell to 49.9 from 50 in July. Readings below 50 are viewed as contraction in the manufacturing space.

August ADP employment data is set for release before Wednesday's open.