Stocks Continue Rally Despite Oil’s New High
Investors shrugged off rising crude futures Wednesday to capture attractively valued shares, sending the Nasdaq composite index up 2% before Google’s much-anticipated initial public offering of stock. The Dow Jones industrial average rose more than 110 points.
Global fears about terrorism and the premium they have added to oil prices have rattled investors, exacerbating the volatility usually associated with late-summer trading. Analysts remained upbeat about the market’s underlying fundamentals, however, and the lack of selling pressure led some to express optimism that the rally, which has lasted through four sessions, might hold.
“People have a tremendous capacity to adapt,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “No story stays in the news forever. So it’s just possible that the market has now fully discounted higher prices of oil, and is poised to move higher.”
The Dow gained 110.32 points, or 1.1%, to close at 10,083.15.
The broader gauges also finished higher. The Nasdaq climbed 36.12 points, or 2%, to 1,831.37. The Standard & Poor’s 500 index rose 13.46 points, or 1.2%, to 1,095.17.
Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange.
Despite the strong performance of tech shares, some analysts questioned the conviction behind the buying. Valuations within the sector, which has been badly bruised, have fallen to appealing levels, but that may not be enough to sustain the rally.
“I wouldn’t take today’s move as a change in sentiment, or any positive sign at all,” said Neil Massa, equity trader at John Hancock Funds. “I think we’re still stuck in this trading range. I think investors are truly worried about third- and fourth-quarter profits. They were expecting a robust recovery ... and it just doesn’t look like that’s happening.”
Investors have grown increasingly worried about inflation in the face of rising energy prices, and a stream of lowered earnings forecasts for the second half of the year has added to that anxiety.
Crude prices surged on worries about lower U.S. inventories and alarm over a Moscow court’s ruling against Russian oil giant Yukos, which is struggling to pay back taxes.
Oil prices eased briefly when a radical Shiite cleric in Iraq accepted a peace plan, but hit a new high by the end of the day, closing up 52 cents at $47.27 on the New York Mercantile Exchange.
On Wall Street, attention was focused on the Google IPO, which had been put off because of delays in the approval of its registration with the Securities and Exchange Commission. The SEC formally approved Google’s $1.86-billion IPO after the market closed.
Many analysts were closely watching other search engines to see how they would react when Google emerges as a publicly traded competitor. Yahoo was up 14 cents at $28.48. Ask Jeeves added 75 cents to $26.08.
In other markets highlights:
* U.S. Treasury yields rose amid what traders called profit taking in the sector. The yield on the benchmark 10-year note rose to 4.24%, from 4.19% on Tuesday. The note had hit a four-month low of 4.15% in early morning trade before rebounding.
* Applied Materials finished up 9 cents at $16.16 after reporting better than expected revenue and earnings that beat Wall Street estimates by a penny. Executives described a climate of healthy chip spending, but the company’s forecast for the next quarter was somewhat disappointing, giving investors a mixed impression.
* BellSouth fell 5 cents to $27.15 after saying a new medical benefits plan for its retirees would dent profit by 3 cents to 4 cents a share in the fourth quarter.
* Mylan Laboratories added 22 cents to $15.58 after saying it would appeal a federal court ruling that found the Food and Drug Administration violated no law when it rejected the company’s application for a generic pain patch treatment.
* Borders Group, the No. 2 U.S. bookstore chain, added 91 cents to $23.23 after boosting its full-year earnings forecast and reporting second-quarter net income that topped estimates.
