Stocks Advance as Oil Prices Decline
Stocks trekked higher Thursday as lower oil prices and the prospect of a good earnings season brightened Wall Street’s mood, offsetting mixed retail sales for March.
While investors still seem to be taking a day-to-day approach, the lack of seriously bad news combined with easing oil prices boosted buyers’ confidence. Barring any negative surprises, some analysts said the market’s path of least resistance, at least in the short term, could be to slowly trend higher.
“We see a lot more things right now pointing to the possibility of a higher market than we do to a panic sell-off,” said Bill Groenveld, head trader for vFinance Investments. “I think we’ll see a slow trend back up as earnings start to roll out, and some easier breathing with a softening in the oil prices.”
Still, with expectations running high, “anything worse than pretty darn good earnings could have a psychologically negative impact,” he cautioned, and investors will be intensely focused on companies’ profit forecasts.
The Dow Jones industrial average closed up 60.30 points, or 0.6%, at 10,546.32.
The broader gauges also finished higher. The Standard & Poor’s 500 index rose 7.07 points, or 0.6%, to 1,191.14.
The Nasdaq composite index added 19.65 points, or 1%, to 2,018.79.
Advancers outnumbered declining issues by about 2 to 1 on the New York Stock Exchange.
A rally in Treasuries stalled, sending the yield on the 10-year note to 4.48%, up from 4.42% on Wednesday. Bond yields rise as their prices fall.
There were also signs of further improvements in the labor market. The number of Americans applying for unemployment benefits dropped by 19,000 last week, the largest decline in two months, pushing the level of claims down to 334,000 after they had unexpectedly jumped by 23,000 last week. The four-week moving average, which smooths out week-to-week volatility, dipped slightly to 336,500.
Crude oil for May delivery tumbled 3.1% to $54.11 a barrel in New York, as hedge funds and other speculators sold futures contracts on signs that increased U.S. refinery output would boost fuel supplies. Oil earlier climbed to $56.84 a barrel and three days ago touched a record $58.28.
“The market is looking through these high energy prices and seeing that they may peak,” said Scott Vergin, who manages $2.5 billion at Thrivent Financial for Lutherans in Minneapolis. “So much is tied to the price of oil.”
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In other markets highlights:
* Alcoa, the world’s biggest aluminum maker, rose $1.49, or 5%, to $31.47 and had the biggest gain in the Dow average. First-quarter earnings, excluding discontinued businesses and other items, were 40 cents a share, the company said after the bell Wednesday. The average analyst estimate in a Thomson First Call survey was 39 cents.
* Harrah’s Entertainment surged on better-than-expected profit, jumping $5.51 to $69.07. The company, which is buying Caesars Entertainment to become the largest U.S. casino company, said first-quarter profit, excluding some costs, was as much as 99 cents a share, more than the 83 cents forecast by analysts in a Thomson poll. Caesar’s added $1.26 to $20.70.
Other gambling companies also saw healthy gains with MGM Mirage rising $2.22 to $72.51, Boyd Gaming picking up $1.60 to $58.25 and Wynn Resorts lifting 94 cents to $64.99.
* Pfizer rose 4 cents to $26.90, reversing earlier declines. The world’s biggest drug maker suspended sales of its Bextra painkiller, which generated 2.4% of Pfizer’s revenue last year, at the request of the Food and Drug Administration. Pfizer also must add the government’s strictest warnings to its other painkiller, Celebrex.
Merck, which voluntarily pulled its Vioxx drug from the market Sept. 30 after heart problems were reported in some users, gained 60 cents to $33.49.
* Wal-Mart, the world’s largest retailer, said net income this quarter would be close to 56 cents a share, compared with its earlier prediction of as much as 58 cents, as sales of more-profitable items lagged behind groceries. The stock dropped 60 cents to $48.90 and was the biggest drag on the Dow average.
Limited Brands, owner of the Victoria’s Secret and Bath & Body Works chains, slumped 78 cents to $23.86. The company said sales at stores open at least a year fell 7% in March from a year earlier. They were expected to decline 2.2%, according to Thomson.
Discount retailer Target was up 77 cents at $50.74 after reporting sales growth of 8.2% for March, beating the expectations of analysts.
* Pier 1 Imports, the largest U.S. retailer of imported home furnishings, fell $1 to $16.99. March same-store sales dropped 18% from a year earlier, more than analysts had expected.
* Starbucks slid $1.63 to $50.50. March sales rose 6%, the smallest gain in more than three years. They had been expected to increase 7.1%, according to Thomson.
