MARKET SAVVY : Stocks Aren’t Fazed as Oil Prices Jump
Crude oil prices topped $23 a barrel Thursday, a 31-month high, as falling inventories suggested the global energy glut is rapidly abating.
Yet Wall Street was surprisingly sanguine about oil’s latest surge and the inflationary implications. Despite another rise in bond yields, most stock indexes closed higher, as winners and losers were nearly evenly matched on the Big Board.
The Dow industrials edged up 43.06 points to 11,079.40. The Nasdaq composite surged 1.5% to 2,852.02, nearing its record high of 2,864.48 reached July 16.
In currency trading, the dollar plunged against the Japanese yen on surprisingly strong economic growth figures from Japan.
In commodity markets, near-term crude oil futures in New York jumped 54 cents, or 2.4%, to $23.20 a barrel, the highest closing price since February 1997.
The nation’s crude oil inventories fell 2% last week, triple analysts’ expectations, the American Petroleum Institute said Thursday.
Supplies now are at the same level they were early in 1998, before surpluses began to mount. Oil prices have almost doubled so far in 1999 as major producers have cut output to eliminate the worldwide glut.
“I increased my price target to $24 a barrel,” George Gaspar, managing director of petroleum research at R.W. Baird & Co. in Milwaukee, told Bloomberg News. “It may be going to $25, and it may not stop there under the circumstances that [producers] hold the line. If we have a cold winter, I am absolutely convinced that we’re going to see $25 crude.”
Also Thursday, natural gas futures surged more than 9%, the biggest gain in a year, as higher prices for competing fuel made natural gas a bargain.
Rising energy prices could fuel higher inflation. Bond yields rose across the board Thursday on inflation jitters, but the increases were mild overall.
The yield on the bellwether 30-year Treasury bond ended at 6.09%, up from 6.06% on Wednesday but still below the recent peak of 6.28% reached in mid-August.
Bonds also are under pressure as the dollar continues to sink against the yen, encouraging Japanese investors to bring their money home.
The dollar crumbled to 107.78 yen, down 3.30 yen from Wednesday and a three-year low, after Japan reported a jump in second-quarter economic growth.
“Japan is clearly on the mend,” said Tomas Jelf, a currency strategist at Warburg Dillon Read. Japanese stocks rose only modestly Thursday, but Hong Kong shares leaped 3.7%, and Singapore stocks gained 1.4%.
Analysts say bullishness about the global economy may be keeping many U.S. investors interested in stocks as well, despite rising oil prices and higher bond yields.
Among Thursday’s highlights:
* Energy stocks soared with crude oil prices. Chevron zoomed $3.13 to $97.56, Baker Hughes gained $1.38 to $35.50, BP Amoco soared $4.69 to $115.81 and Burlington Resources rose $2.13 to $43.81.
* Major tech stocks gained as optimism about computer sales continues to rise worldwide. IBM surged $4 to $134.75, Intel leaped $1.81 to $87.75, BMC Software jumped $4.63 to $63.13 and Cisco Systems was up $1 to $69.94.
Many Internet stocks also rocketed, led by EBay, up $9.69 to $144.44, and Doubleclick, up $7.31 to $101.31.
* Some telecom equipment stocks were strong. General Instrument gained $2.13 to $52.94, and Spectrian rocketed $4.13 to $25.63.
* On the downside, many financial shares weakened as bond yields rose. Chase Manhattan tumbled $4.25 to $77.50, Wells Fargo was off 63 cents to $39.31 and Charles Schwab eased 50 cents to $38.31.
* Maytag slumped $2.75 to $56.56, continuing a recent plunge. The appliance company declined to comment on the stock’s activity. Rival Whirlpool fell $2.31 to $70.31.
Market Roundup, C8
