Stocks Gain as Oil Prices Slip
Stocks managed to squeeze out modest gains in a volatile session Monday as crude oil futures, which briefly topped $58 a barrel in early trading, settled lower. A rare piece of good news for beleaguered Dow Jones industrial American International Group helped blue chips make gains.
Oil prices again kept investors on edge after reaching a new intraday high of $58.28 a barrel early in the session. After fluctuating throughout the day, oil futures settled at $57.01, down 26 cents, on the New York Mercantile Exchange.
Yet oil remained a source of concern for investors, who fear that crude prices in the high-$50 range could eat into consumer spending, prompting either an economic slowdown or rising prices that could trigger inflation. And there was no real sign that oil would decline substantially.
“It’s hard to say where that line in the sand is, that level for oil prices where the market will seriously sell off,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “I do think that if you have sustained levels of $60 to $65, then the market will be very hard-pressed to make any move to the upside.”
The Dow Jones industrial average rose 16.84 points, or 0.2%, to 10,421.14.
Broader stock indicators also moved modestly higher. The Standard & Poor’s 500 index climbed 3.20 points, or 0.3%, to 1,176.12, and the Nasdaq composite gained 6.26 points, or 0.3%, to 1,991.07.
Advancing issues outnumbered decliners by nearly 5 to 4 on the New York Stock Exchange.
Bonds edged lower as oil prices fluctuated. The yield on the 10-year Treasury note rose to 4.46% from 4.45% on Friday. Some traders said they needed more proof that the economy was slowing before purchasing government debt with yields at a two-week low.
Reports last week showing tame inflation and the lowest monthly jobs growth since July sparked the biggest weekly rally in prices of Treasuries since August. Bond yields move in the opposite direction as prices.
“If anything, the tendency in the bond market right now seems to be more bearish,” said Scott Gewirtz, co-head of U.S. government bond trading at Deutsche Bank Securities Inc. in New York. The firm is one of the 22 primary dealers of government securities that trade with the Fed’s New York branch.
The dollar was mixed against other major currencies, while gold prices fell.
In other market highlights:
* AIG gained $2.35 to $53.30 after New York Atty. Gen. Eliot Spitzer said that a civil resolution with AIG would be achievable, and that the company was fully cooperating with his investigation of the company’s accounting and business practices.
* Procter & Gamble, the largest U.S. maker of household goods, advanced $1.29 to $53.90. The 2.5% rally was the second biggest in the Dow average. The company said it would raise prices on its premium Millstone coffee by 14% next week, a month after increasing prices on its top-selling Folgers brand amid surging bean costs.
* Johnson & Johnson, the maker of thousands of products including Tylenol and artificial hips, gained $1.13 to $67.98. An index of makers of so-called consumer staples, such as food and household products, rose 0.6%. A gauge of healthcare stocks added 0.5%.
* Qwest Communications International, seeking to pressure MCI to accept its $8.9-billion takeover offer, rose 18 cents to $3.82. Qwest said it had enough money to fund the transaction and to improve MCI’s network to be more competitive.
Verizon Communications threatened to abandon its $7.5-billion bid for MCI if MCI directors said they favored Qwest’s competing offer. Verizon, the biggest U.S. local-telephone company, rallied 46 cents to $35.65. MCI, the No. 2 U.S. long-distance telephone company, dropped 21 cents to $25.08.
* General Motors lost 33 cents to $29.05 after the company said Chief Executive Rick Wagoner would take direct control over daily responsibility for the automaker’s struggling North American division.
* ChevronTexaco lost $2.33 to $56.98 after the No. 2 U.S. oil company agreed to buy Unocal for $16.4 billion, marking the oil industry’s biggest purchase since 2002. The acquisition values Unocal at $62 a share. That represents a 3.7% discount to Unocal’s closing price April 1.
Unocal fell $4.75, or 7.4%, to $59.60, the steepest drop in the S&P; 500.
