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Plunge in Crude Oil Prices Bolsters Wall Street Rally

Times Staff Writers

Wall Street’s postelection rally gained yardage Thursday, fueled by a sharp drop in crude oil prices.

The Dow Jones industrial average climbed more than 177 points -- its biggest one-day advance in more than a year -- while the broader Standard & Poor’s 500 index of blue-chip stocks closed at its highest point since March 2002.

The two biggest drags on the stock market this fall have been uncertainty over the presidential election and rising crude prices, analysts say. Investors are flocking back to Wall Street, they say, in the wake of President Bush’s reelection and a recent slide in oil prices. On Thursday a barrel of crude dropped $2.06 to $48.82 in New York trading.

“There was a certain amount of money on the sidelines pending the outcome of the election, and that doesn’t get put to work all in one day,” said Kevin Marder, a strategist at Ladenburg Thalmann Asset Management in Los Angeles.

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“But the price of crude,” he said, “had been holding the stock market back even more than the election uncertainty.”

The Dow rose 177.71 points, or 1.8%, to 10,314.76, adding to its 101-point gain Wednesday, when Bush was declared the winner. The S&P; 500 rallied 18.47 points, or 1.6%, to 1,161.67 for its eighth gain in a row -- the index’s longest winning streak in more than a year.

The technology-heavy Nasdaq composite climbed 19.30 points, or 1%, to 2,023.63, its highest close since June 30.

More than three stocks rose for every one that declined on the New York Stock Exchange, and gainers outnumbered losers by 4 to 3 on Nasdaq. Trading was active.

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The equity indexes started gaining steam around 11 a.m. Eastern time, when crude peaked at about $51 a barrel and began heading south, reversing Wednesday’s postelection boost in oil prices.

Traders were reacting Thursday in part to a weekly federal report that showed the nation’s natural gas stockpiles had grown to record levels, marking an improved outlook for winter supplies. Earlier in the week, government data showed a steep buildup in crude oil reserves.

Marshall Steeves, an energy analyst at Refco Ltd., said the oil market’s slide also reflected increased profit taking by futures traders.

“People are saying maybe oil is overpriced at more than $50,” Steeves said. “But I don’t see us going into the low $40s. We may go down a couple more dollars and consolidate there.”

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Phil Flynn of Chicago’s Alaron Trading Corp. said some of the decline stemmed from unsubstantiated -- and disputed -- reports that Palestinian leader Yasser Arafat had died.

“The risk premium in oil, which is anywhere between $3 to $5 a barrel, is because of the risk of terror. And there’s a belief that the big reason that there are a lot of terrorists out there is because of the Israeli-Palestinian issue,” Flynn said. “If Arafat is out of the way, they think there is hope that maybe there can be a [peace] deal.”

In other commodity trading, gold rose $5.50 an ounce to a 16-year high of $430.10 as the dollar’s continuing slide against the euro made the precious metal cheaper for overseas buyers.

On the currency market, the euro climbed versus the U.S. dollar to $1.287, from $1.282 on Wednesday. The dollar also fell against the Japanese yen.

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U.S. Treasury securities were mixed. The yield on the benchmark 10-year note fell to 4.07%, from 4.08% on Wednesday.

On Wall Street, relatively robust sales in the U.S. retail sector also gave the stock market a lift, as major chains reported a 4% average jump in October revenue at stores open at least a year. Gap, which rose $1.90 to $22.14, and J.C. Penney, which gained $2.82 to $37.42, said their third-quarter profits would top previous forecasts when official results are reported.

The Dow’s biggest boost came from Altria Group, the owner of Philip Morris and Kraft Foods, which zoomed $4.23 to $54.23 after Chief Executive Louis Camilleri said the conglomerate might split into two or three parts, a move some investors have sought for years.

Other winners in the index included 3M, which rose $2.79 to $78.08; Alcoa, which gained $1.10 to $33.20; and General Motors, which climbed $1.20 to $39.50.

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Whether the stock market’s postelection rally can continue today may depend on this morning’s payroll report from the Labor Department.

Economists surveyed by Bloomberg News estimated that U.S. employers added 175,000 nonfarm jobs in October. Several disappointing payroll tallies earlier this year sent the equity market reeling.

Among Thursday’s other equity highlights:

* Qualcomm dropped $1.80 to $38.07 after the wireless-equipment maker warned late Wednesday of disappointing quarterly results.

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* Sharper Image slid $2.20 to $19.48 after the gizmo seller said it would post a wider-than-expected third-quarter loss, bucking the retail sector’s positive trend.

* Riverboat casino operator Argosy Gaming climbed $4.57 to $45.32 after rival Penn National Gaming said it would buy Argosy for $47 a share in cash plus assumption of debt. Penn National rose $10.78 to $52.22.

* The latest climb for precious metals boosted mining shares, including Freeport-McMoRan Copper & Gold, which rose $1.92 to $38.10, and Newmont Mining, which gained 94 cents to $47.94.

* Builder Granite Construction surged $1.71 to $26.40 after its third-quarter profit topped forecasts.

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