Stocks Get Boost From Oil, GDP
Bargain hunters flocked back to Wall Street on Wednesday, giving the stock market its biggest gain this year, as a drop in oil prices and some encouraging economic news pushed aside investors’ concerns for a day.
The Dow Jones industrial average jumped 135.23 points, or 1.3%, to 10,540.93.
The Dow and other major indexes saw their biggest one-day gains since Dec. 1.
Some analysts cautioned against reading too much into the advance, saying that the market was overdue for a short-term bounce after recent sustained selling.
Still, many traders were encouraged by the breadth of the advance: Rising stocks outnumbered losers by more than 3 to 1 on the New York Stock Exchange and by more than 2 to 1 on Nasdaq.
Oil prices set the scene for the rally early in the day, after the Energy Department reported a 5.4-million-barrel increase in the nation’s crude oil reserves last week, double what analysts had expected.
Near-term crude oil futures in New York sank as low as $52.50 a barrel, compared with Tuesday’s closing price of $54.23. The price recovered later in the session, closing down 24 cents at $53.99, but the rebound failed to derail the stock rally.
The Standard & Poor’s 500 index rose 16.05 points, or 1.4%, to 1,181.41. The technology-heavy Nasdaq composite jumped 31.79 points, or 1.6%, to 2,005.67, after falling to a five-month low on Tuesday. The Nasdaq closed above the 2,000 mark for the first time since March 21.
The Russell 2,000 index of smaller stocks leapt 1.7%.
Some investors also were encouraged after the Commerce Department reported its final estimate of U.S. gross domestic product growth in the fourth quarter. The agency said the economy expanded at a 3.8% real annualized rate.
“Normally you wouldn’t see this GDP report as a good thing, but with inflation [fears] out there, a little bit less growth is viewed as a positive,” said Larry Peruzzi, a trader at Boston Company Asset Management.
The stock and bond markets have been hard hit in recent weeks over concerns that inflation pressures may be rising in the economy. That could force the Federal Reserve to tighten credit at a faster pace, some analysts say.
Treasury bond yields slipped on Wednesday, also helped by oil and the GDP report. The yield on the benchmark 10-year T-note fell to 4.55% from 4.58% Tuesday.
The Commerce Department today will release its February report on personal consumption expenditures, which provides a measure of inflation. On Friday, the Labor Department will release employment data for March.
Both reports will be closely watched, particularly by bond traders, analysts said.
“Until we get a handle on what’s going on with rates it’s difficult to know what’s next, and that puts a bit of a lid on stocks,” said Steven Goldman, chief market strategist with Weeden & Co. in Greenwich, Conn.
Among the day’s market highlights:
* Semiconductor stocks got a boost after Micron Technology reported a profit in its fiscal second quarter and beat Wall Street’s expectations. Micron rose 36 cents, or 3.6%, to $10.48.
Among other chip firms, International Rectifier rose $2.28 to $45.77. Advanced Micro Devices rallied 79 cents to $16.21.
* AMR, parent of American Airlines, soared $1.10 to $11.03 as Merrill Lynch upgraded it to “buy” from “neutral.” The firm expects AMR’s stock to increase to $14 within a year.
The 10-stock Amex Airline Index jumped 5.2%, its biggest advance since Dec. 1. Delta Air Lines gained 5 cents to $4.15. Continental Airlines climbed 92 cents to $11.89. Northwest Airlines increased 28 cents to $6.89.
* American International Group fell $1.04 to $57.16. The insurer, which this month ousted its chief executive amid regulatory probes, said it engaged in false accounting practices that may have inflated the company’s net worth by as much as 2% in the last 14 years. AIG also had its AAA credit rating cut by Standard & Poor’s.
* Waters slumped $9.52, or 21%, to $36.74 for the worst performance in the S&P; 500. The maker of liquid chromatography products for the pharmaceutical industry said first-quarter net income would be as much as 37 cents a share, less than its January forecast of 44 cents.
Other scientific-equipment makers declined. PerkinElmer, which makes lab equipment, slid $1.34 to $19.81.
* Pfizer gained 65 cents to $26.29 after a judge ordered rivals to stop making a generic version of Pfizer’s Accupril, used to treat high blood pressure.