Dow Posts Gain as Oil Declines
Buyers returned to Wall Street on Friday as energy prices fell, but the stock market’s advance was modest, and key indexes lost ground for the week.
Treasury bond yields rose in advance of the Federal Reserve’s meeting Tuesday, where policymakers are expected to raise interest rates again.
Gold remained on a hot streak, topping $525 an ounce.
Stock prices edged up as oil dropped below $60 a barrel and as the latest reading of the University of Michigan’s index of consumer sentiment climbed to 88.7 from 81.6 in November.
“So far the consumer has remained pretty resilient,” said Christopher Sheldon, who helps manage $78 billion at Mellon Private Wealth Management in Boston. That is underpinning confidence about economic growth in 2006.
The Dow Jones industrial average gained 23.46 points, or 0.2%, to 10,778.58, only its second advance in six sessions.
The broader Standard & Poor’s 500 index added 3.53 points, or 0.3%, to 1,259.37, and the Nasdaq composite rose 10.27 points, or 0.5%, to 2,256.73.
Winners outnumbered losers by 3 to 2 on the New York Stock Exchange and on Nasdaq.
For the week, however, the Dow slid 0.9% and the S&P; 500 lost 0.5%. Nasdaq fell 0.7%, ending a seven-week winning streak.
For the year to date, the Dow is down 0.04%. But the blue-chip index is understating returns in the broader market. The NYSE composite index, for example, is up 7.1%. The Russell 2,000 small-stock index is up 5.7%.
The average U.S. stock mutual fund is up 7.7%, according to Morningstar Inc.
In energy trading, near-term crude oil futures dropped $1.27 to $59.39 a barrel after reaching a five-week high Thursday. Natural gas futures also pulled back from a record high reached Thursday. Traders said nervousness over energy supplies, amid a cold wave in the East, moderated Friday.
In the bond market, the strong consumer sentiment reading triggered some selling on fears that the economy might be strong enough in coming months to justify continued credit-tightening by the Fed.
The central bank is expected to raise its key short-term rate from 4% to 4.25% on Tuesday, the 13th increase since mid-2004.
The improvement in consumer sentiment “definitely exacerbated the down-trade” in Treasuries, said Glen Capelo, a trader at RBS Greenwich Capital in Greenwich, Conn. It fed speculation that “once January rolls around, maybe the data will still be strong and the Fed will still be on the move.”
The 10-year Treasury note yield rose to 4.53% from 4.46% on Thursday. It was up from 4.51% a week ago.
Gold remains the surprise investment star of the quarter. Near-term futures in New York jumped $7.70 to $527 an ounce, the highest in 24 years. The price was $503.30 a week ago and $472 at the end of September.
Traders have listed numerous reasons that gold is in vogue, including concerns about inflation and the risk of a recession if the Fed tightens credit too severely.
But many also say gold is hot simply because it’s hot. “The train is moving out of the station and no one wants to miss the ride,” said John Licata, a New York-based analyst.
Among the day’s highlights:
* Intel recovered despite a disappointing near-term sales forecast Thursday. The stock added 38 cents to $26.08.
* Eli Lilly jumped $1.20 to $53.41. It forecast 2006 earnings per share of $3.10 to $3.20, up from about $2 expected this year.
* Jamdat Mobile soared $4.29 to $27.06 one day after Electronic Arts agreed to buy the firm for $27 a share. Electronic Arts fell 61 cents to $55.14.
