Wall St drops as Libya, oil concerns weigh

NEW YORK (Reuters) - Stocks fell for a second day on Wednesday as protests in Libya drove up oil prices, fueling concerns about further unrest in the Middle East.

The S&P 500 slid 2.1 percent on Tuesday, suffering its worst session since August, and analysts said the market's long-awaited pullback may be here.

Hewlett-Packard Co cut its 2011 revenue forecast on slipping consumer demand for its personal computers, pushing its stock down almost 10 percent and dragging on the Dow,

Covering short positions helped limit Wednesday's losses, said Chris Burba, short-term market technician at Standard & Poor's in New York.

"But odds favor downside in the near term ... The pace of the advance is slowing and that behavior often precedes a consolidation or a downturn," he said.

The S&P 500 has climbed 25 percent since the start of September, when the recent rally began.

Oil futures in New York jumped to the loftiest level for front-month crude since October 2, 2008, amid worries over supply disruptions in Libya, a top oil producer.

While higher oil prices often boost energy-sector shares, they usually drag on the overall stock market. Higher energy costs tend to ripple through the economy, pushing up the costs of utilities, manufactured goods and transportation.

A senior aide to Libyan leader Muammar Gaddafi's influential son Saif resigned as an Italian official claimed as many as 1,000 people have been killed in the government crackdown.

"Higher oil prices certainly are a concern. That has an impact on real economic activity, but while it is something to monitor, I'm not sure the market has fully incorporated significantly higher prices just yet," said Mike Morcos, senior money manager at Old Second Wealth Management in Aurora, Illinois.

Technology shares led losses after Hewlett-Packard trimmed its revenue forecast late Tuesday, citing weak consumer demand for personal computers and posted a lackluster showing from its services arm. The stock sank 10.2 percent to $43.33.

The Dow Jones industrial average <.DJI> was down 61.11 points, or 0.50 percent, at 12,151.68. The Standard & Poor's 500 Index <.SPX> was down 5.93 points, or 0.45 percent, at 1,309.51. The Nasdaq Composite Index <.IXIC> was down 25.11 points, or 0.91 percent, at 2,731.32.

Brent and U.S. crude oil futures gained further ground on worries about supply disruptions as the revolt raged in Libya raged.

An energy-sector index <.GSPE> rose 2.2 percent and kept the S&P 500's loss in check.

U.S. existing home sales rose unexpectedly in January, but home prices fell to their lowest level in nearly nine years, the National Association of Realtors said.

(Reporting by Caroline Valetkevitch; Additional reporting by Rodrigo Campos and Ryan Vlastelica; Editing by Jan Paschal)

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