Drop in Oil Prices Helps Extend Wall Street Rally

Wall Street extended its fourth-quarter rally into a second day Monday, supported by lower oil prices and a bullish assessment of the economy from a Federal Reserve official.

Home builder stocks, however, took a dive after Pulte Homes said it was rolling back prices in the booming Las Vegas market to boost sagging sales.

Investors overall were cheered by a drop in oil prices, which backed off from the $50 mark that was topped on Friday. A barrel of crude closed at $49.91, down 21 cents, in New York.

Stocks also received a boost before the session opened when Philadelphia Federal Reserve President Anthony Santomero said in a speech that he expected the economy to grow at a rate of 3.5% to 4% through 2005.

Santomero’s comments, and the institutional buying that is typical at the start of a new quarter, helped drive the Dow up as much as 78 points early in the day after Friday’s advance of more than 112 points.

But the rally faded as the session progressed. The Dow ended up 23.89 points, or 0.2%, at 10,216.54.

Broader stock indicators also were moderately higher. The Standard & Poor’s 500 index was up 3.67 points, or 0.3%, at 1,135.17, and the Nasdaq composite index gained 10.20 points, or 0.5%, to 1,952.40.

The S&P; 600 small-stock index rose 1.85 points, or 0.6%, to 299.38, its second consecutive record high.

Advancing issues outnumbered decliners by nearly 8 to 5 on the New York Stock Exchange in active trading.

With the market having advanced four of the last five sessions, some investors were growing optimistic about a fourth-quarter rally, and were looking past third-quarter corporate earnings reports, which many expect to be relatively disappointing.

But Friday’s monthly job-creation report, one of the most closely watched reports on the economy, probably will shape trading for weeks to come, analysts said.

“I think the third-quarter earnings are already priced in, so any surprises we get out of there will be a positive for the market,” said Neil Massa, equity trader at John Hancock Funds. But the September job figure “has the potential to be either really good for the market or spark a major sell-off.”

In economic news Monday, the government reported a 0.1% decrease in factory orders in August. However, orders were up when civilian aircraft were excluded.

In the Treasury bond market, long-term yields jumped early in the day but pulled back as stocks’ rally softened. Some traders were awaiting a speech from Federal Reserve Chairman Alan Greenspan today.

The yield on the benchmark 10-year note rose to 4.24% in the morning but ended at 4.17%, down from 4.19% on Friday.

In other market highlights:

* Pulte shares plunged $5.30, or 8.6%, to $56.33 after a Smith Barney analyst reported that the builder was slashing prices 20% to 25% in the Las Vegas market.

After the market closed, Pulte confirmed it was rolling back price increases and lowered its earnings guidance for the third quarter to $1.95 to $2.05 a share, down from $2 to $2.10 a share. The stock sank below $53 in after-hours trading.

Pulte said home buyers in the Las Vegas market had balked at price increases, which in some cases were well above the region’s average price gain of 50%.

Other big builders in the region shared the pain. In regular trading, KB Home lost $3.61 to $80.89, D.R. Horton sank $2.03 to $30.91, Ryland Group dropped $3.90 to $88.99, and Lennar fell $2.30 to $45.30.

* Siebel Systems, which makes customer service software, jumped $1.15, or 14%, to $9.34. The company said third-quarter revenue was as much as $317 million, more than the average analyst estimate of $306 million in a Thomson First Call poll.

Other software shares rallying included Veritas, up $1.10 to $19.62; Citrix Systems, up 80 cents to $19.87; and Blackboard, up $1.73 to $19.10.

* U.S. Steel surged $2.39 to $40.75, its highest close since April 1998. Chief Executive John Surman said Monday that domestic demand for steel would keep rising next year.

Among other steel issues, Nucor gained $3.78 to $96.80, International Steel Group rose $1.46 to $34.86 and Olympic Steel was up $1.16 to $19.25.

* Nu Skin Enterprises, which makes personal-care products, plummeted $7.86 to $16.46 after warning that third-quarter earnings would fall short because of higher selling expenses in Asia.

A number of other consumer products companies, including Colgate-Palmolive and Coca-Cola, in recent weeks have warned about weaker near-term results.

* Wynn Resorts, which is building a major resort and casino in Las Vegas, jumped $2.31 to a record $53.29. The stock has soared from $35 in mid-August.

* Merck, which dropped 27% on Thursday after pulling its arthritis drug Vioxx from the market, edged up for a second day, gaining 92 cents to $34.23.