Investors’ Answer to High Gasoline Prices

On Friday, the market took back about half of Thursday's gains on worries over the continuing struggle for power in Libya and the consequential impact of oil at over $100 a barrel. The unemployment rate fell to 8.9%, but non-farm payrolls at 192,000 were slightly below the optimistic forecasts of Thursday.

Daily Stock Market News

Dow: -88 points at 12,170

S&P 500: -10 points at 1,321

Nasdaq: -14 points at 2,785

For the Week

Dow: +0.3%

S&P 500: +0.1%

Nasdaq: +0.1%

Volume and Breadth

NYSE: 1 billion shares traded; decliners ahead 1.4-to-1

Nasdaq: 515 million shares traded; decliners ahead 1.9-to-1

Futures and Related ETFs

April Crude Oil: +$2.51 at $104.42 per barrel; Energy Select Sector SPDR (NYSE: XLE ) -50 cents at $78.34

April Gold: +$21.20 at $1,437.60 per barrel; PHLX Gold/Silver Sector Index (NASDAQ: XAU ) +0.8 points at 215.86

What the Markets Are Saying

Friday started sharply lower, and by noon, almost all of Thursday's gains had been erased. But a late-day rally salvaged about half of the earlier losses and enabled the major indices to close slightly higher for the week.

Despite the big bounce at the end of the day, volume was low and many commentators chalked up the last-minute buying to short-covering. The low volume and the fact that the buying terminated at the first island of resistance at 1,320 to 1,325 on the one-minute chart are in line with the conclusion that the day ended with a short-covering rally.

Unfortunately for the bulls, all of the major indices closed below their respective 20-day moving averages, which are at 12,206.95 for the Dow, 1,322.47 for the S&P 500, and 2,785.07 for the Nasdaq. But they are above their respective near-term trendlines and their 50-day moving averages.

For two weeks, the market's volatility has been higher than normal, with the CBOE Volatility Index (VIX) jumping from a low of 15.54 on Feb. 18, the day before the correction began, to a high of 23.22 just two days later. On Friday, the VIX closed at 19.06, which is still not low enough to conclude that the selling has run its course, but obviously better than earlier in the week.

With the market again reverting to headline news for direction, and the news focused on the price of oil, trying to discern its signals becomes more difficult. And even though the trend is up, it is under attack and barely hanging on to its near-term up trendline while very close to breaking the respective 20-day moving averages.

The European Central Bank (ECB) president Jean-Claude Trichet said on Thursday that it could raise interest rates as soon as next month. He referred to the higher prices of oil and food and their impact on inflation as causes for an increase. This is the first admission by a senior official of the West of an inflation problem and the possible need to raise interest rates to combat it. If the bank did raise rates, it would add to the problems of the weaker European countries and no doubt push the United States into a responsive increase despite its goal of the "pursuit of maximum employment."

We have all seen the rise in the price of gasoline. The cause, of course, is the current crisis in North Africa and the Middle East. And when that situation improves, oil prices will most likely fall. But here is a chart of United States Gasoline Fund (NYSE: UGA ), an exchange-traded fund (ETF) that investors could use as a hedge against gasoline price increases or as a short-term trade. I'd prefer to buy it on a pullback, but if the crisis worsens, this fund will most likely move higher.

I'll be covering other ways to hedge against inflation later this week since the threat is no longer hypothetical. Inflation is eating into the budgets of Americans along with the rest of the world - even if our Federal Reserve refuses to admit it.

For one stock to buy now, see the Trade of the Day .

Today's Trading Landscape

To see a list of the companies reporting earnings today, click here .

For a list of this week's economic reports due out, click here .

If you have questions or comments for Sam Collins, please e-mail him at .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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