Stocks Regain Ground as Petroleum Prices Decline
A sharp decline in oil prices -- the biggest this year -- helped stocks Wednesday recover from early losses triggered by a plunge in durable goods orders.
Some analysts said the market’s comeback was a positive sign amid continuing concerns over corporate earnings and the broader economic picture. But some observers felt that the uptick lacked conviction and predicted a continuation of the volatility that has dogged stocks during this earnings season.
“The bias seems to be to the upside [Wednesday], and if we continue to get good news the market can move higher,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “But I still think it’s likely to remain volatile through the end of the week.”
The Dow Jones industrial average closed up 47.67 points, or 0.5%, at 10,198.80. It was down as much as 72 points early in the day, after losing 91 points Tuesday.
The broader gauges also rebounded. The Standard & Poor’s 500 index added 4.64 points, or 0.4%, to 1,156.38. The Nasdaq composite inched up 2.99 points, or 0.2%, to 1,930.43.
Advancing issues slightly outnumbered decliners on the New York Stock Exchange.
Oil plummeted $2.59 to $51.61 a barrel on the New York Mercantile Exchange after the government’s weekly inventory report, which showed a 5.5-million-barrel increase in U.S. supplies.
The falling price of oil cheered investors, who had been worried by the Commerce Department’s report that orders to U.S. factories for durable goods -- big-ticket items that last three years or more -- plunged 2.8% in March. Some drop was expected, but the reading was far weaker than economists expected. It renewed concerns that the economy might be entering another “soft patch” as consumers and businesses, jolted by hefty fuel prices, cut back spending.
The economic concerns pushed Treasury bond yields lower, with the benchmark 10-year note falling to 4.23% from 4.27% on Tuesday. Treasury yields decline as their prices rise, so the move reflected money flowing into government bonds as a haven.
At the same time, analysts said the durable goods numbers reduced the likelihood the Federal Reserve would take a more aggressive approach to raising short-term interest rates when policymakers meet Tuesday.
“Some of the numbers and evidence suggest the cyclical expansion is not as strong as people believe, but it is still resolutely good,” said Subodh Kumar, chief investment strategist for CIBC World Markets. “I think that what is happening is the markets are readjusting to more moderate growth.”
In other markets highlights:
* Reflecting the market’s comfort on the interest rate issue, financial stocks were among the day’s best gainers. Among banks, Comerica rose 97 cents to $57.24 and Citigroup gained 43 cents to $47.05. Ace, the Bermuda-based property and casualty insurer, added $1.87 to $41.49 and liability insurer Chubb climbed $1.89 to $80.16.
* HMO stocks rallied after WellPoint reported strong quarterly earnings. WellPoint soared $6.42 to $124.45. UnitedHealth rose $2.63 to $92.69.
* The top performer in the Dow was Verizon Communications, which rose $1.22 to $35.22, after topping Wall Street forecasts with a first-quarter profit of $1.76 billion on a 6.6% rise in revenue, thanks to its rapidly growing wireless business.
* Energy stocks dropped amid falling crude prices. Exxon Mobil slid 89 cents to $58.38, making it the Dow’s worst-performing stock for the day. ChevronTexaco sank $1.62 to $52 and ConocoPhillips lost $3.05 to $103.70.
* Many industrial stocks were hurt by the durable-goods report. U.S. Steel sank $1.69 to $42.82, Cummins fell $1.16 to $68.89 and Deere lost 94 cents to $62.14.
* Commodity-related stocks also were under pressure. Copper producer Phelps Dodge lost $3.70 to $85.54, even after soundly beating Wall Street expectations by doubling its first-quarter earnings year over year.
Gold producer Newmont Mining tumbled $2.55 to $37.70. First-quarter profit fell to 19 cents a share, partly because of rising costs. Analysts expected earnings of 30 cents.
* Amazon.com slid 99 cents to $31.72, nearly a two-year low. The company said after the market close Tuesday that first-quarter sales rose strongly but net income sagged 30% because of rising costs.
* European markets were broadly lower on worries about that economy. The main German stock index fell 1.1%; the French market dropped 1.6%.
