Greenspan’s Remarks Depress Oil, Lift Stocks
Stocks got a lift from Federal Reserve Chairman Alan Greenspan on Tuesday, rising moderately after he said the recent climb in oil prices was curbing demand for crude. Oil futures dropped on the news.
Speaking by satellite to a group of U.S. petrochemical producers meeting in San Antonio, Greenspan said that energy demand was softening, albeit “only modestly.”
But he added that rising inventories of crude, if sustained, could eventually “damp the current price frenzy.”
Crude oil futures slid after Greenspan’s remarks, with a barrel of light crude settling 97 cents lower at $56.04 on the New York Mercantile Exchange.
The stock market, battered over the last month by rising oil prices and higher interest rates, took some comfort from the Fed chief’s comments.
The Dow Jones industrial average rose 37.32 points, or 0.4%, to 10,458.46.
Broader indexes also moved higher. The Standard & Poor’s 500 index was up 5.27 points, or 0.4%, at 1,181.39, and the Nasdaq composite gained 8.25 points, or 0.4%, to 1,999.32.
Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange.
Still, some analysts said investors were likely to remain focused on the near-record price of oil and what it might mean for the economy this year.
“Energy continues to be a drag on the market because, sure, you’re down $1 a barrel today, but these prices are still high and they’ll start to bite into consumer spending at some point,” said Russ Koesterich, senior portfolio manager at Barclay’s Global Investors in San Francisco.
Greenspan’s comments on oil kept the bond market on an even keel. Traders had braced for the possibility of a sell-off in bonds, whose yields rise as their prices decline, if Greenspan had struck a gloomier tone about the trend in energy prices.
Rising oil prices could further boost inflation pressures, which in turn could force the Fed to tighten credit at a faster pace. The central bank has been gradually raising short-term interest rates since June.
“He really didn’t seem to be that concerned about the oil price increase, and people had been worried he would be,” said David Ging, fixed-income strategist at Credit Suisse First Boston, adding: “That somewhat mitigated inflation concerns.”
The yield on the benchmark 10-year Treasury note edged up to 4.47% from 4.46% on Monday.
Today in the bond market California is expected to sell nearly $1 billion in tax-exempt general obligation bonds.
On Wall Street, some investors sought bargains after March’s losses in the stock market. Many were still ambivalent and preferred to wait for next week, however, when first-quarter earnings reports start in earnest.
“I think you’re getting at least a few investors, with an asset allocation point of view, seeing these lower prices and getting back into the market,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “The underlying economic fundamentals are pretty good, but you still have everyone’s favorite ghost -- oil -- making things very tentative.”
In other market highlights:
* Pfizer climbed 97 cents to $26.90 and was the biggest contributor to the S&P; 500’s gain. The company’s plan to cut $4 billion in annual costs by 2008 exceeded most analysts’ estimates by at least $1 billion. Pfizer is slashing expenses to try to compensate for the expiration of patents on key drugs and waning demand for the painkiller Celebrex.
An index of drug companies gained 2.1%, the biggest rally among 24 sectors in the S&P; 500. Merck, which withdrew its Vioxx painkiller from the market last year, added 54 cents to $33.04. Eli Lilly rose $1.88 to $53.21.
U.S. shares of Sanofi-Aventis, the largest supplier of flu shots to the U.S. market, added $1.29 to $43.14. Prudential Equity Group initiated coverage of the shares with an “overweight” rating.
* Utility shares continued to attract buyers. The Dow utility index rose 2.43 points, or 0.7%, to a four-year high of 363.61. Dominion Resources gained 42 cents to $76.50; AES jumped 59 cents to $17.14.
* Boston Scientific gained $1.42 to $30.71. The company said the Food and Drug Administration approved the company’s proposal to allow patients who receive the firm’s coronary stents to undergo magnetic resonance imaging examinations immediately after implantation.
* Google climbed $3.28 to $188.57 after Lehman Bros. upgraded the shares to “overweight” from “equal weight.” Google may have higher-than-expected 2005 sales as the company increases its share of Internet-search revenue and benefits from foreign growth, Lehman analyst Douglas Anmuth said.
* Online music service Napster raised its profit forecast for the second time in a month because of better-than-expected sales and subscriptions. Its shares climbed 57 cents to $6.74.
