Stocks Advance Despite Bonds
Stocks advanced Friday as crude oil prices fell to six-week lows on signs that record fuel costs are slowing growth in global energy demand.
Volume on Wall Street was extremely heavy because of technical trading related to the quarterly expiration of key stock option and futures contracts.
The market managed to overlook a jump in Treasury bond yields triggered by increasing concerns about inflation, even as oil pulled back.
The Dow Jones industrial average rose 83.19 points, or 0.8%, to 10,641.94.
Near-term oil futures in New York slumped $1.75 to $63 a barrel, the lowest closing price since Aug. 5. Gasoline futures also slid.
The Organization of the Petroleum Exporting Countries, in a report Thursday, reduced its forecast for oil demand for a fifth straight month. The U.S. Energy Department and the International Energy Agency have also cut their demand estimates this month.
“Signs of weaker demand are hanging over the market,” said Tom Bentz, an oil broker at BNP Paribas Commodity Futures.
Concern about the surge in oil prices that followed Hurricane Katrina -- oil peaked at $69.81 a barrel Aug. 30 -- sent consumer confidence tumbling this month. It may also have triggered widespread conservation, some economists say.
Still unclear is whether consumers will significantly reduce their spending in coming months because of energy worries.
Wall Street on Friday took a more optimistic view of the economy. After three days of losses, rising stocks outnumbered losers by about 3 to 2 on the New York Stock Exchange and on Nasdaq.
The Standard & Poor’s 500 index rose 10.18 points, or 0.8%, to 1,237.91; the Nasdaq composite gained 14.20 points, or 0.7%, to 2,160.35.
For the week, however, the Dow lost 0.3%, the S&P; fell 0.3% and Nasdaq retreated 0.7%.
Although stocks gained Friday, the bond market was riled by fears that the inflationary effects of Katrina might persist even if oil prices are damped. Federal Reserve bank branches in New York and Philadelphia on Thursday said manufacturers in their regions reported surging cost pressures this month.
The prospect of a ballooning federal budget deficit because of Katrina rebuilding costs also is stoking longer-term inflation worries, analysts said.
The 10-year Treasury note yield jumped to a five-week high of 4.27% on Friday from 4.21% on Thursday. A week ago, the yield was at 4.12%.
Immediately after Katrina hit, many analysts had expected the Fed to temporarily suspend its credit-tightening campaign. But with inflation fears rising, most economists say policymakers are likely to raise their benchmark rate from 3.5% to 3.75% when they meet Tuesday.
Gold prices also are signaling higher inflation, some analysts say: Near-term gold futures rose $4 to $459.50 an ounce Friday, a 17-year high. The price was up $10.50 for the week.
Among the day’s highlights:
* Gold-mining and other commodity stocks were in demand as inflation hedges. Glamis Gold soared $1.07 to $22.17, Newmont Mining jumped $1.22 to $46.21, Rio Tinto was up $4.66 to $155.87 and Deltic Timber rose $1.61 to $45.39.
* Insurance stocks gained as some investors saw less reason to be concerned about losses from Katrina. Hartford Financial rose $1.34 to $76.28 and Everest Re jumped $4.50 to $100.02.
* Adobe Systems soared $2.53, or 9.4%, to $29.43 for the best performance in the S&P; 500. The software company said fiscal third-quarter profit, excluding some items, was 29 cents a share. Analysts on average expected 27 cents.
* McDonald’s added 79 cents to $34.24. Pershing Square Capital, the hedge fund that pressured Wendy’s International to sell assets, has acquired a 4.9% stake in McDonald’s, a person familiar with Pershing told Bloomberg News.
* Germany’s DAX stock index surged 1.6% ahead of the country’s election this weekend, as some investors bet on a new, more conservative government, traders said.
