Stocks Rebound; Industrial Issues Take the Lead

Stocks rebounded Tuesday as investors snapped up shares of heavy-industry companies in sectors including energy, chemicals and machinery.

Rising oil prices, which helped drive the Dow Jones industrial average to a six-week low on Monday, failed to keep buyers away on Tuesday.

The Dow jumped 88.86 points, or 0.9%, to 10,077.40.

The Standard & Poor’s 500 index gained 6.54 points, or 0.6%, to 1,110.06, and the Nasdaq composite added 9.99 points, or 0.5%, to 1,869.87.

Rising stocks outnumbered losers by more than 2 to 1 on the New York Stock Exchange and by 5 to 3 on Nasdaq, in active trading.

With the third quarter ending on Thursday, analysts said some institutional investors were engaging in “window dressing” -- buying stocks that have performed well in the quarter so that clients see those names on end-of-quarter statements.

Energy shares have been particularly hot as oil prices have soared since June. Other natural-resources stocks also have been winners.

Oil continued to rally Tuesday, with near-term crude futures in New York gaining 26 cents to $49.90 a barrel. The price rose above $50 early in the session but backed off after Saudi Arabia indicated it would raise its output if necessary.

The pullback in oil prices helped stocks gain steam later in the day, said Brian Williamson, an equity trader at Boston Co. Asset Management.

The market also was bolstered by a bullish outlook from machinery giant Caterpillar, one of the 30 stocks in the Dow.

Caterpillar surged $2.48 to $76.90 after saying sales this year would increase as much as 30%. The company in July predicted a 25% gain. Next year sales should rise 10%, the company said.

Many analysts are upbeat about the market’s underlying fundamentals, but given all the uncertainties surrounding energy costs, the jobs picture, the presidential election and persistent terrorist fears, few were convinced that Tuesday’s rally would be sustained.

Among the day’s highlights:

* Machinery makers rising with Caterpillar included Deere, up $1.82 to $63.24; United Technologies, up $1.08 to $92.35; Bucyrus International, up $1.70 to $33.56; and Cummins, up $1.50 to $72.17.

* Energy stocks rose with crude prices. Amerada Hess gained $2.82 to $89.21, Schlumberger jumped $1.60 to $67.66 and Southwestern Energy soared $2.38 to $42.38.

Also, Valero Energy climbed $2.04 to $79.09 after saying third-quarter earnings would exceed $3 a share because of increased profit margins on refined fuels. The company had previously forecast $2.50 a share.

* Investors snapped up producers and processors of other raw materials besides oil. Strength in those stocks usually indicates optimism about global economic growth, analysts said.

Fertilizer producer Potash jumped $2.23 to $62.30, copper giant Phelps Dodge soared $4.26 to $93.60 and aluminum processor Alcoa gained $1.34 to $32.70.

* Dow Chemical added $1.20 to $43.79. The largest U.S. chemical maker may increase its prices on rising demand and as plants for plastics, paint and textiles approach capacity, Credit Suisse First Boston analyst William Young wrote in a note to clients, citing the company’s comments during an investor conference in New York.

* Gold stocks rallied as gold futures rose to a six-week high, adding $3.40 to $412.50 an ounce in New York.

Newmont Mining advanced $1.69 to $44.29 after the world’s biggest gold miner boosted its estimated gold reserves in Ghana 33%, to 16 million ounces.

* Steel stocks resumed their recent rally. Nucor jumped $4.21 to $90.50 and U.S. Steel shot up $2.17 to $37.75.

* On the downside, tool maker Snap-On tumbled $3.85 to $27.83 after saying third-quarter profit would fall short because of higher steel prices.

* Lowe’s gained 33 cents to $53.76 after the home improvement retailer reiterated its earnings projections for the quarter and the year, and issued a bright forecast through 2006 based on an expectation of robust sales growth next year.

* Among new stock issues, San Diego-based Internet research firm WebSideStory rose 54 cents to $9.04 on its first day of trading.

* There was little action in the bond market. The 10-year Treasury note yield inched up to 4% from 3.99%.