Economic Data Lift Stock Prices Despite Oil Rise
Strong economic data trumped anxiety over surging oil prices Tuesday, with Wall Street indexes holding their own or posting slight gains.
A weekend attack on foreign oil workers in Saudi Arabia, which left 22 people dead, sent oil prices climbing $2.45 to a record $42.33 per barrel in New York trading. That jump in turn raised stock investors’ worries about the effect of rising energy prices on inflation and the Federal Reserve’s interest rate policy.
However, a larger-than-expected rise in construction spending and strong growth in the manufacturing sector suggested that the potential for higher rates would not harm two of the major engines of the economy -- a major concern of investors.
Those bullish figures kept stocks from plunging and let buyers reenter the market late in the session. Light volume after the holiday weekend helped keep volatility low as well.
The Dow Jones industrial average was up 14.20 points, or 0.1%, at 10,202.65.
Broader stock indicators were narrowly higher. The Standard & Poor’s 500 index was up 0.52 points, or nearly flat, at 1,121.20, and the Nasdaq composite index gained 4.03 points, or 0.2%, to 1,990.77.
Stocks were coming off solid gains last week, the first major up week on Wall Street in more than a month. However, many investors are holding off making large bets until Friday’s monthly payroll report -- a major gauge of the economy’s strength -- is released.
“We’re sort of in waiting mode,” said Peter Coolidge, a money manager with Deltec Asset Management Corp. in New York. “There’s no real impetus to go out there and sell or buy.”
Tuesday’s economic indicators depicted a growing economy.
Construction spending rose 1.3% in April, the best month ever, while the Institute of Supply Management’s index of manufacturing activity rose to 62.8 in May, up from 62.4 in April.
Both figures were better than economists expected, leaving little doubt that the Federal Reserve would raise interest rates this month. That forced Treasury prices to falter, pushing their yields higher.
The yield on the benchmark 10-year Treasury note rose to 4.70%, from 4.65% on Friday, the last day of trading before the Memorial Day holiday.
Like the stock market, bond traders also are focused on Friday’s U.S. payrolls report, where any surprise decline in job growth is viewed as the last possible barrier to a rate hike by the central bank, whose policymakers next meet June 29 and 30.
“The economy is still growing, and the world expects inflation to rise,” said Gary Pollack, who oversees $12 billion in bonds at Deutsche Bank’s private-banking group in New York. “Treasury yields will move higher from here.”
The dollar gained against the yen but fell against the euro. Traders attributed the climb against the Japanese currency to the strong U.S. manufacturing numbers.
On Wall Street, declining issues were nearly even with advancers on the New York Stock Exchange.
Among Tuesday’s market highlights:
* An index of transportation companies lost 1.1% as the jump in oil and gas prices threatens to boost their costs.
Delta sank 41 cents, or 6.7%, to $5.69, for the steepest drop in the S&P; 500. US Airways Group fell 24 cents, or 9.2%, to $2.37. Southwest Airlines, the largest low-fare carrier, slid 15 cents to $15.36. FedEx shed 76 cents to $72.82.
* An index of energy stocks rose 1.3%, for the largest gain among the S&P; 500’s 10 industry groups. Exxon Mobil advanced 45 cents to $43.70. ConocoPhillips climbed $1.88 to $75.21 and Valero Energy rose $2.52 to $68.63.
* Viacom fell 46 cents to $36.81 after its president, Mel Karmazin, unexpectedly resigned.
* Intel, which will give a sales update after the market closes Thursday, fell 22 cents to $28.33. Merrill Lynch & Co. analyst Joe Osha said the company might miss the high end of its sales forecast for this quarter because of slow demand. The company had predicted $7.6 billion to $8.2 billion in sales.
Market Roundup, C7
