Blue Chips Rise as OPEC Signals an Output Boost
Blue-chip stocks got a boost Wednesday as OPEC signaled it would raise output to help curb surging oil prices, offering investors some relief from persistent worries about inflation. But the overall market was mixed while Wall Street awaited May employment numbers from the Labor Department and Intel’s mid-quarter forecast.
Trading was light, with few investors making big moves ahead of data that could give them clues about the direction of the economy and corporate profits.
“Everyone seems pretty complacent about the market,” said David Hegarty, head trader at Commerzbank Securities.
“They’re not seeing a dire need to do anything either way, to buy or to sell. It’s not exciting ... and that’s fine. I think the market is pretty fairly valued right now.”
The Dow Jones industrial average closed up 60.32 points, or 0.6%, at 10,262.97, its highest finish in four weeks.
Broader gauges were narrowly mixed. The Nasdaq composite index eased 1.79 points, or 0.1%, to 1,988.98. The Standard & Poor’s 500 gained 3.79 points, or 0.3%, to end at 1,124.99.
Bond yields continued to rise in expectation that the Federal Reserve will raise short-term interest rates at the end of the month. Bond yields rise as their prices fall -- and the prospect of higher interest rates has Treasury prices slipping.
On the benchmark 10-year note, the yield rose to 4.74% on Wednesday -- up from 4.70% on Tuesday and from 4.65% before the Memorial Day weekend.
Friday’s payrolls report for May is expected to show a third month of robust job creation, a result that would essentially cast aside any lingering hopes that the Fed could hold off tightening credit until later this summer.
“Leading indicators of job creation were generally favorable,” noted Steven Wood, chief economist at Insight Economics. “Hiring intentions have continued to improve.”
Wall Street, meanwhile, has been closely watching oil prices, which reached a 21-year high Tuesday after a weekend terrorist attack in Saudi Arabia.
A possible remedy was in sight Wednesday, however, when the president of the Organization of the Petroleum Exporting Countries said the group must assess its ability to produce more in an effort to calm the markets.
“I think the feeling is ... barring any unforeseen geopolitical problems, the price of oil is going to head lower,” said Peter Cardillo, market strategist at S.W. Bach & Co.
Near-term crude oil futures in New York tumbled $2.37 to $39.96 a barrel.
Although the prospect of lower fuel prices was good news for inflation-wary investors, buyers seemed to lack conviction Wednesday.
Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange, but winners had only a small edge on Nasdaq.
Some market participants may be reluctant to make big commitments ahead of the May employment report. A number of computer chip companies also are preparing mid-quarter updates this week, including industry bellwether Intel, which will release its forecast after the market closes today.
Among Wednesday’s market highlights:
* Fairchild Semiconductor International shed $1.37 to $18.13 after the chip maker said unpredictable customer orders might prevent it from meeting its sales forecast this quarter.
An index of 18 major chip-related stocks dropped 2.3% after surging 6.7% last week.
KLA-Tencor, which makes semiconductor-inspection equipment, dropped $1.65 to $46.06. Intel lost 32 cents to $28.01.
* Wal-Mart added 91 cents to $56.35, and other retailers advanced on the promise of lower oil prices. Target gained $1.12 to $45.38. Tiffany, the luxury jewelry retailer, added 95 cents to $36.32.
* Airline shares rallied for the first day in five as oil prices fell. Delta Air Lines gained 39 cents to $6.08. AMR, parent of American Airlines, rose 83 cents to $12.18. Continental Airlines climbed 86 cents to $11.30.
* Among industrial stocks, Briggs & Stratton soared $7.65 to a record $83.40 after agreeing to buy Simplicity Manufacturing, which makes Snapper brand tractors.
Copper miner Phelps Dodge fell $1.37 to $66.93 after the company said it would reinstate cash dividends with a 25-cents-a-share payment in September.
* Los Angeles-based VCA Antech slipped 14 cents to $44.06 after rising $1.17 to a record $44.20 on Tuesday, when the owner of veterinary hospitals raised its sales and earnings forecast for this year.
* Two Dow index components were downgraded by brokerages. McDonald’s lost 4 cents to $26.43 after Prudential Investments lowered its rating from “overweight” to “neutral.” Home Depot fell 9 cents to $35.67 after Bank of America downgraded it to “neutral.”
Market Roundup, C6
