Stocks Rise on Greenspan’s Remarks Despite Surge in Oil
Stocks bounded higher Thursday as bullish congressional testimony from Alan Greenspan and anticipation for a strong mid-quarter update from Intel brightened Wall Street’s mood and overshadowed a surge in oil prices.
The Federal Reserve chairman told lawmakers the economy appeared strong, with inflation under control. His generally positive assessment supports the view that the Fed, which has raised interest rates eight times over the last year, will probably continue nudging rates higher at a gradual pace. Fed policymakers are widely expected to raise the federal funds rate by another quarter-point to 3.25% at their next meeting, set for June 29-30.
“Once everyone sifted through all the comments, the realization was that he hasn’t changed his thoughts about the economy,” said Peter Cardillo, chief strategist at S.W. Bach & Co. in New York. “He doesn’t think the economy is ready to fall off a cliff, and that’s basically a strong fundamental for the stock market.”
The Dow Jones industrial average rose 26.16 points, or 0.2%, to 10,503.02, after spending the first part of the session in negative territory.
The broader gauges also closed higher. The Standard & Poor’s 500 index was up 6.26 points, or 0.52%, at 1,200.93. The Nasdaq composite index added 16.73 points, or 0.8%, to 2,076.91.
The yield on the 10-year note inched up to 3.95%, from 3.94% on Wednesday. The dollar was higher against other major currencies and gold prices fell.
Crude oil surged $1.74 to settle at $54.28 per barrel in New York trading, a day after posting a decline.
The Labor Department reported that the number of people filing new claims for unemployment benefits fell by 21,000 last week, the biggest decline in seven weeks. Analysts attributed the improvement to fewer layoffs in the auto industry and a shortened workweek because of the Memorial Day holiday.
In other market highlights:
* Energy stocks soared on higher oil prices. Exxon Mobil climbed $1.71 to $58.44 and ConocoPhillips added $1.76 to $56.26.
On the other hand, concern that higher energy costs will crimp earnings sent a measure of airlines and trucking companies down 1% for the steepest decline among the S&P; 500’s 24 industry groups.
Delta Airlines decreased 7 cents to $3.85. United Parcel Service dropped $1.16 to $71.20. A Morgan Stanley analyst lowered UPS to “equal-weight” from “overweight,” citing price cuts by some of its competitors. Rival FedEx tumbled $2.08 to $87.62.
* Intel rose 60 cents to $27.70. After the market’s close, the company boosted its second-quarter forecasts on surging laptop shipments. Intel expects $9.1 billion to $9.3 billion in sales, more than its earlier estimate of $8.6 billion to $9.2 billion. Some investors had hoped for even better numbers, and Intel fell 43 cents in after-hours trading.
National Semiconductor climbed $1.79, or 9%, to $21.69. The maker of microchips that boost battery life in mobile phones said fiscal fourth-quarter sales were $467 million, higher than the $465.5 million expected by analysts in a Thomson First Call survey.
* Google rallied $6.75 to $286.31. Smith Barney analyst Mark Mahaney initiated coverage on the world’s most-used Internet search engine with a “buy” rating and a 12-month price forecast of $360 a share. The advance trimmed in half Wednesday’s loss that was sparked by a report that prices for search-based advertising dropped.
* H&R; Block gained $5.53, or 11%, to $56.18 for the best performance in the S&P; 500. The tax-preparation company said fiscal fourth-quarter profit was $3.66 a share, beating the $3.52 average estimate in Thomson’s survey. The company also said its board approved a 2-for-1 stock split.
* Take-Two Interactive Software, maker of the bestselling “Grand Theft Auto” video games, rose $1.47 to $27.99, after it said the Securities and Exchange Commission accepted the company’s settlement offer to end an accounting probe.
