Stocks Rally as Oil Prices Slip
Stocks were broadly higher Monday as oil held below $49 a barrel, and as the Treasury bond market shrugged off a report showing that foreign investors sharply cut back on purchases of U.S. securities in March.
But the dollar slipped on the foreign-investment report. And the junk bond market continued to be hit by selling.
The Dow Jones industrial average gained 112.17 points, or 1.1%, to 10,252.29, its first advance since Wednesday.
The Standard & Poor’s 500 index added 11.64 points, or 1%, to 1,165.69.
The technology-dominated Nasdaq composite, which last week bucked the downtrend in the broader market, rallied further. It rose 17.65 points, or 0.9%, to 1,994.43, a one-month high.
Winners outnumbered losers by more than 2 to 1 on the New York Stock Exchange and by 3 to 2 on Nasdaq.
Oil declined for the third time in four sessions, with near-term futures in New York easing 6 cents to $48.61 a barrel.
That helped to offset news that a Federal Reserve index measuring manufacturing activity in New York unexpectedly fell this month, analysts said.
“The picture for the market is generally pretty bright,” said Edwin Miska, who manages about $1 billion for First Investors Management in New York. “If oil can settle in at a lower level in the $40s as opposed to the $50s, that’s almost like a rebate to consumers and to businesses.”
Stocks also were supported by a calm Treasury bond market. Yields were little changed even though the government said foreign investors bought a net $27.9 billion of Treasury securities in March, down from $42.5 billion in February.
The nation’s huge trade and budget deficits have been heavily financed by foreign investors’ purchases of U.S. securities, so any decline in foreign demand raises the prospect of a funding shortfall -- and higher interest rates.
Overall, foreigners bought a net $45.7 billion in U.S. government bonds, corporate bonds and stocks in March, down from $84.1 billion in February.
But the Treasury bond market wasn’t ruffled by the news. The yield on the 10-year T-note ended at 4.13%, up slightly from 4.12% on Friday, which was a three-month low.
The dollar, however, halted its recent rally. The euro inched up to $1.264 from $1.263. The dollar ended at 107.02 yen, down from 107.28.
“The data indicate insufficient finance for the trade deficit,” said Ashraf Laidi, chief currency strategist at MG Financial Group in New York. “This is at the heart of structural concerns about the dollar.”
In the corporate junk bond market, which has been slammed by the recent downgrade of debt of General Motors and Ford Motor to junk status by Standard & Poor’s, bond prices continued to drop, pushing yields higher.
The average yield on 100 junk bonds tracked by KDP Investment Advisors rose to 7.88%, up from 7.81% on Friday and the highest since June.
Among the day’s highlights:
* Indexes of smaller stocks outpaced blue chips. The Russell 2,000 index jumped 9.69 points, or 1.7%, to 591.71. It is down 9.2% this year compared with a 4.9% decline in the Dow industrials.
* Tech stocks on the upswing included Cisco Systems, up 20 cents to $19.09; Stamps.com, up $1.22 to $21.55; and Macromedia, up $1.10 to $39.84.
Also, Ipayment rocketed $6.74 to $38.29 after the company’s chairman offered $38 a share in cash for the credit card payment processing firm.
* Home improvement retailer Lowe’s jumped $2.94 to $55.80 after the company said quarterly earnings rose 31%. Rival Home Depot, a Dow index stock, gained $1.08 to $37.37.
* Trucking stocks got a boost after UPS said it would buy Overnite for $1.25 billion. Overnite soared $12.94 to $42.52. Among other truckers, JB Hunt rose $1.31 to $39.45, Yellow Roadway gained $1.90 to $50.10 and CNF was up $2.21 to $43.95. UPS added $1.03 to $73.18.
* Thrift and home-building stocks rallied on optimism that long-term interest rates might not rise much more. Newport Beach-based Downey Financial leapt $3.88 to a record high of $73.13. Builder KB Home was up $2.22 to $58.29.
* Many energy stocks continued to slide. Valero lost $1.10 to $60.66, Chevron was off 77 cents to $50.51 and Encana slid 42 cents to $64.49.
* South Pasadena-based Cogent, a maker of fingerprint identification systems, added 16 cents to $22.77. After the market closed the company announced plans to sell 11 million new shares. Four million would be sold by the firm and 7 million by insiders. Cogent would have 90.5 million shares outstanding after the offering.
