Volatile Stocks Rally After Drop in Oil Prices
Stocks staged a late rally Tuesday after a drop in oil prices eased fears that the biggest decline in consumer confidence since the Sept. 11 terrorist attacks would lead to deeper economic slowdown.
Near-term natural gas futures, meanwhile, rose again and the dollar fell to its lowest level against the Japanese yen since September.
Crude oil fell after Secretary of Energy Spencer Abraham said the United States would quickly tap its strategic oil reserves should the need arise if a war with Iraq erupted. Expectations that U.S. crude oil inventories would show a rise when weekly inventory data are released today also helped push prices lower, traders said.
Crude for April delivery closed at $36.06 a barrel in New York trading, down 42 cents from Monday’s close and off more than $1 from its early-session high of $37.10.
Falling oil prices “act like an interest-rate cut or a tax cut,” said Steve Young, a stock strategist at Banc of America Capital Management in St. Louis.
“Instead of spending two bucks a gallon and putting it in your tank or using it to heat your house, you will spend elsewhere and be more productive to the economy.”
The Dow Jones industrial average, down almost 140 points in the early going, closed up 51.26 points, or 0.7%, at 7,909.50.
The Standard & Poor’s 500 index rose 5.99 points, or 0.7%, to 838.57 and the Nasdaq composite index added 6.60, or 0.5%, to 1,328.98, after falling as much as 2.1%.
Winners beat losers by 4 to 3 on the New York Stock Exchange and were about even on Nasdaq. Trading volume was the heaviest since Jan. 31, according to Bloomberg News.
Share prices initially sank after the Conference Board said its index of consumer confidence tumbled in February to 64 -- a bigger drop than expected and the lowest reading since 1993.
The gloomy reading from consumers worsened Wall Street’s mood, already dampened by news that North Korea fired an anti-ship missile Tuesday during a training exercise.
Stocks rebounded as the price of crude oil fell and buyers stepped into the session.
“That took some negativity out of the market,” said Tim Smalls, managing director at S.G. Cowen. “We also had a turnaround in communication and technology shares, which helped -- nothing strong, but it’s a little bit of a stabilization.”
In the Dow, IBM gained 51 cents to $79.07, SBC Communications rose 60 cents to $21.35 and Intel advanced 19 cents to $16.73.
Retailers rebounded from a drubbing on Monday. Wal-Mart rose 79 cents to $48.43 and J.C. Penney was up 67 cents to $20.06.
In currency trading, the yen rose against the dollar after Japanese Finance Minister Masajuro Shiokawa indicated that Japan and the U.S. are divided on how to weaken the currency. The yen advanced to 117.25 per dollar from 117.92 on Monday, and is at its strongest level since Sept. 4, when it traded at 116.94.
Traders said the yen may strengthen to between 115.5 and 116.5 per dollar in coming days.
The dollar was little changed against the euro.
In other highlights:
* Near-term natural gas futures rose as traders bought before the expiration of the contract today. Gas for March delivery rose 44 cents, or 4.9%, to $9.577 per 1,000 cubic feet in New York trading. Gas for April delivery fell $1.022 to $6.60 after rising 21% on Monday.
Before Tuesday, the record closing price for the contract closest to expiration was $9.978 on Dec. 27, 2000. The March price has surged 64% in the last seven sessions on concern the frigid winter will send U.S. inventories of the fuel to the lowest ever before the end of the heating season. The latest report on U.S. gas stockpiles is due Thursday.
* Gold prices slid after the European Central Bank said one of its members sold an unusually large chunk of bullion last week. Gold’s allure as a haven was further dulled by possible signs of Iraqi cooperation with U.N. arms inspectors. In New York trading, gold fell $4 to $352.30 an ounce.
* Treasury bond yields fell on the consumer confidence report, hitting their lowest level of the year before rebounding late in the day. The yield on the benchmark 10-year Treasury note finished at 3.82%, down from 3.84% Monday.
The yield on the two-year T-note fell to a generational low of 1.55%. It has dropped from 1.72% in mid-January.
* AOL Time Warner jumped 37 cents to $10.43. It was the second-most active name on the Big Board after published reports that two potential bidders have shown interest in buying its book publishing division.
Market Roundup, C6-7
