Oil Prices Set Record; Stocks Extend Rally
Oil prices soared to a record high Friday as embassy shutdowns in Nigeria sparked new fears of supply disruptions, but the latest surge in energy costs failed to end the stock market’s recent string of gains.
Near-term crude futures rose $1.89 to $58.47 a barrel in New York trading, eclipsing the April 1 closing record of $57.27, as investors reacted to reports that U.S. and British consular offices in Lagos, Nigeria, were closed temporarily as a security measure. Nigeria is a member of OPEC and the fifth-biggest supplier of imported oil to the United States.
“The talk about political disruption in Nigeria gets people nervous about supply and gives them another reason to buy,” said Andrew Lipow, head of Lipow Oil Associates, a Houston consulting firm. “It’s hard to get out of the way of the bullish sentiment right now.”
On Wall Street, blue chips advanced for the seventh straight session as the benchmark Standard & Poor’s 500 index nosed into positive year-to-date territory for the first time since March 9. An upswing in consumer sentiment and brokerage upgrades for stocks in the housing sector countered the latest oil surge. And the higher crude prices gave a boost to energy stocks.
In heavy trading, the Dow Jones industrial average rose 44.42 points, or 0.4%, to 10,623.07; the S&P; 500 climbed 6 points, or 0.5%, to 1,216.96; and the technology-heavy Nasdaq composite index added 0.96 point, or 0.1%, to 2,090.11.
On the New York Mercantile Exchange, Friday’s gain in oil prices added to the rally that has seen crude futures jump 25% in the last month.
On Wednesday, the Organization of the Petroleum Exporting Countries raised its production quota to 28 million barrels a day, an increase of 500,000 barrels, but analysts said the move did little to quell fears of supply shortfalls later in the year.
“With these prices, no one is holding back,” said Fadel Gheit, senior energy analyst at investment firm Oppenheimer & Co. in New York.
Gheit noted that OPEC already was producing 30 million barrels a day regardless of its quota. “There is no spare capacity, period, and the market is realizing that,” he said.
Oil’s momentum could lift prices further in the coming weeks as traders chase returns, analysts said.
“There’s a lot of investment money out there looking for a home, and the stock market hasn’t been all that great,” Lipow said.
Meanwhile, near-term gasoline futures rose 4.93 cents, or 3.1%, to $1.6471 a gallon on Nymex, the highest closing price since April 25. Prices surged 6.7% for the week -- the largest jump in almost two months -- and gasoline futures are up 39% from a year ago. The record close of $1.731 a gallon was reached April 1.
Pump prices, meanwhile, have been ticking up in recent days. In California, self-serve regular was selling for an average of $2.368 a gallon Friday, according to the latest AAA survey, up from $2.365 on Thursday.
Stock traders took encouragement, however, from the University of Michigan’s initial consumer sentiment index reading for June, which topped economists’ expectations by coming in at 94.8, its first month-to-month gain this year and a five-month high.
Home builder stocks rallied a day after KB Home reported better-than-expected quarterly earnings and boosted its profit guidance for the full year, signaling that the housing boom still had steam. Brokerage Smith Barney boosted its ratings on KB Home and five of its competitors.
KB Home jumped $5 to $77.25, Pulte Homes gained $3.75 to $86 and Ryland Group rose $2.53 to $76.37.
Among energy stocks, refiner Valero Energy climbed $3.26 to $79.95 after guiding analysts’ profit expectations higher for this year. Chevron gained $1.05 to $58.97 and Exxon Mobil rose 77 cents to $60.89. Those reaching 52-week highs included ConocoPhillips, which climbed $2.08 to $60.68, and Occidental Petroleum, which gained $1.01 to $80.13.
The dollar fell sharply against major currencies after the Commerce Department said the current account deficit jumped 33% in the first quarter from a year earlier to a record $195.1 billion. The euro zoomed to $1.228 from $1.209 on Thursday.
Bond yields were little changed.
For the week, the Dow gained 1.1%, the S&P; 500 rose 1.6% and Nasdaq climbed 1.3%. The indexes are mixed for the year: The S&P; is up 0.4%, but the Dow is down 1.5% and Nasdaq is off 3.9%.
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In other highlights:
* Hard-disk-drive makers slumped after Merrill Lynch said the industry was mired in a price war. Seagate Technology slid $1.29 to $19 and Western Digital lost $1.04 to $13.36.
* Software maker Adobe Systems sagged $1.07 to $31.34 after guiding sales expectations for the current quarter lower.
* Clothier Tommy Hilfiger gained 77 cents to $12.98 after Merrill Lynch upgraded the stock, saying its “compelling” valuation could make it a takeover candidate.
* Software maker Synopsys fell $1.36 to $17.44 after the IRS said the company owed $477 million in back taxes.
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Bloomberg News was used in compiling this report.
