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Oil hits new 2 1/2-year high; stocks fall for the day but gain for the week

March 4, 2011 |  1:25 pm

Financial markets' manic mood swings continued Friday, as another jump in oil prices helped fuel a modest pullback in stocks in favor of classic hiding places -- Treasury bonds and precious metals.

April crude futures in New York closed up $2.51 to $104.42 a barrel, a new 2 1/2-year high. For the week, the price rose $6.54, or 6.7%, and it’s up 21% from two weeks ago, when unrest in the Middle East and North Africa began to escalate.

Fighting continued to rage in Libya on Friday between rebels and forces loyal to Moammar Kadafi, but oil traders said the greater concern was the risk of revolt spreading to Saudi Arabia and Iran.

“We’re up here [in price] because of the bigger fear about the bigger fish,” said Ray Carbone, head of Paramount Options, a commodities brokerage in New York.

Bahrain More anti-government demonstrations were reported in Iraq and also in Bahrain, which is an ally of Saudi Arabia.

Anti-government activists in Saudi Arabia reportedly are trying to organize a "Day of Rage" for March 11.

Carbone said the sentiment in the oil market was that prices were unlikely to pull back soon, given the continued uncertainty about the political future of the Middle East.

“I think we’re going higher,” he said.

On Wall Street, stocks showed modest losses early in the day after the government said the economy gained a net 192,000 jobs last month, close to analysts’ expectations. The market fell further as oil prices moved higher, but buyers returned in the final 30 minutes of trading.

The Dow Jones industrial average ended off 88.32 points, or 0.7%, at 12,169.88 after being down as much as 179 points. For the week the Dow edged up 0.3%, thanks to Thursday’s 191-point surge on the heels of some strong economic reports.

Broader market indexes’ losses Friday were about in line with the Dow. The Standard & Poor’s 500 dropped 0.7%; the Nasdaq composite was off 0.5%. Both were up fractionally for the week.

Even though stocks haven't lost much from their multiyear highs reached Feb. 18 -- the S&P 500 is off 1.6% from that point -- the question is whether rising volatility will drive more investors away.

Friday’s winners were traditional investment havens. Some money moved back into Treasury securities, pushing yields lower. The five-year T-note yield -- which had jumped to 2.28% on Thursday from 2.17% on Wednesday after upbeat reports on unemployment benefit claims, retail sales and service-sector activity -- fell back to 2.17% on Friday.

Gold, which fell $21.20 to $1,416 an ounce Thursday amid profit-taking after reaching a record $1,437.20 on Wednesday, gained $12.20 to $1,428.20 on Friday. Silver roared to a new 31-year high, up $1 to $35.32 an ounce.

-- Tom Petruno

Photo: Anti-government demonstrators in Bahrain on Friday. Credit: Hamad I. Mohammed / Reuters