Oil Price Drop Fuels a Muted Gain in Stocks
A drop in crude oil prices buoyed stocks Monday, boosting benchmark indexes for a fifth straight session, but gains were muted by unease over today’s presidential election.
Crude closed at $50.13 a barrel, down $1.63, in New York trading. That was the lowest closing price since Oct. 4, when oil was $49.91 a barrel.
“The oil picture certainly helps, but you still have a lot of people sitting on their hands,” said Brian Belski, market strategist at Piper Jaffray. “There’s not a lot of engagement overall, and there won’t be until we see if there’s a decisive winner on Wednesday. If there is, no matter who it is, we’ll probably go higher.”
The Dow Jones industrial average rose 26.92 points, or 0.3%, to 10,054.39. The Standard & Poor’s 500 index gained 0.31 point, or 0.03%, to 1,130.51. It was the first five-day streak of gains for both indexes since the last week of July.
The technology-heavy Nasdaq index added 4.88 points, or 0.2%, to 1,979.87.
The major indexes traded in a narrow range as Wall Street professionals anticipated a close election in which the winner may not be immediately clear.
“Getting through the uncertainty is going to be so important,” said Benjamin Pace, chief investment officer at Deutsche Bank Private Wealth Management.
Pace thinks that the market will wake up once a victor is decided. “We are calling for a year-end rally, regardless of who wins,” he said.
Investors did have some economic news to mull over. The Commerce Department reported a 0.6% rise in consumer spending, after a 0.1% drop in August. However, personal incomes rose by only 0.1%, and the savings rate fell to 0.2% from 0.7%.
Also on Monday, the Institute for Supply Management said its manufacturing index fell in October, coming in at 56.8, far lower than the 58.5 reading expected by Wall Street.
Traders, however, saw little movement stemming from those reports.
“The market is basically ignoring these economic numbers and just waiting to see what happens Wednesday morning, if anything,” said John Lynch, chief market analyst at Evergreen Investments.
“The market, at this point, is simply looking for clarity. The market’s fundamentals are sound, but we’re preoccupied by the election.”
Oil’s decline, however, did ease concern that higher fuel costs will slow the economy -- boosting shares of companies including United Technologies, maker of Pratt & Whitney jet engines; Honeywell International, the world’s biggest maker of cockpit electronics; and construction equipment giant Caterpillar.
United Technologies added $1.98 to $94.80, Honeywell rose $1.36 to $35.04 and Caterpillar gained $1.30 to $81.84.
Falling oil prices also helped push up yields in the Treasury market. Easing crude prices should give the Federal Reserve more leeway in its plan to continue raising interest rates. The yield on the benchmark 10-year note rose to 4.08% from 4.02% on Friday.
At the same time, the decline in oil prices sent an index of energy companies down 0.7%. Exxon Mobil slipped 40 cents to $48.82 and Occidental Petroleum gave up 28 cents to $55.55.
In other market highlights:
* Merck plunged $3.03 to $28.28 after a media report claimed that the drug maker knew about potential health risks with its arthritis drug Vioxx years before it pulled the drug from the market in late September. Vioxx was found to increase the risk of heart attack and stroke.
Pfizer, which makes the competing Celebrex and Bextra painkillers, lost 15 cents to $28.80.
* Golden West Financial, the Oakland-based parent of World Savings Bank, fell $1 to $115.92 on a downgrade by an analyst who said market conditions were getting tougher for adjustable-rate mortgages, Golden West’s specialty.
Frederick Cannon of Keefe, Bruyette & Woods said interest rate changes since last summer had made fixed-rate loans more attractive to consumers. Increased competition also is a factor; Cannon said Washington Mutual and Countrywide Financial were offering monthly adjustable loans with rates up to a full percentage point below Golden West’s.
* Internet search engine Google hit another high, adding $5.39 to $196.03. Google shares have gained 131% since the company went public Aug. 19.
