Oil Drops $1.90, Fueling Modest Rally in Stocks
Wall Street tried to snap out of its recent funk Monday, rallying modestly as energy prices declined.
Signs that Tropical Storm Ernesto won’t threaten Gulf of Mexico energy facilities helped push near-term crude oil futures down $1.90 to $70.61 a barrel in New York.
That helped revive interest in battered transportation stocks. Retail stocks also were mostly higher on hopes that falling gasoline prices would boost consumers’ spending power.
“The economy is stronger than people have given it credit for,” said Michael Cuggino, who oversees $750 million as chief executive of Pacific Heights Asset Management in San Francisco.
The Dow Jones industrial average rallied 67.96 points, or 0.6%, to 11,352.01, nearing the three-month high of 11,381.47 reached Aug. 18. The Standard & Poor’s 500 index added 6.69 points, or 0.5%, to 1,301.78. The technology-heavy Nasdaq composite jumped 20.41 points, or nearly 1%, to 2,160.70.
Winners topped losers by more than 2 to 1 on the New York Stock Exchange. Trading volume remained depressed with many investors on vacation.
U.S. blue-chip stocks have been moving higher in fits and starts since mid-June, when the market bottomed after a sharp sell-off tied to interest rate fears.
The Federal Reserve on Aug. 8 paused in its two-year credit-tightening campaign, raising hopes that rates had peaked.
The market today will get more insight into the Fed’s thinking, as the central bank releases the minutes of its Aug. 8 meeting.
A host of economic data this week also could shed more light on the outlook for U.S. growth. Investors have been hoping for the “Goldilocks” scenario -- an economy growing fast enough to push corporate earnings higher, but not so fast that the Fed feels compelled to raise rates further.
The Conference Board today will report on consumer confidence in August. On Friday the government will report on the month’s employment trends.
Stocks stalled out last week on fresh signs that the housing market was slowing markedly.
The Treasury bond market continues to bet that the Fed is finished raising rates, analysts say. The yield on the 10-year T-note ended at 4.79% on Monday, up just one tick from the five-month low of 4.78% on Friday. That is well below the Fed’s benchmark short-term rate, now at 5.25%.
Among the day’s market highlights:
* The Dow transportation index rose 1.3%, boosted by a rebound in airline and trucking shares. Continental Airlines gained $1 to $23.96. Ryder added 85 cents to $49.30.
* Energy pipeline company Kinder Morgan rose $2.57 to $104.27 after agreeing to a buyout offer worth $107.50 a share. The deal helped boost other pipeline issues, including Williams Partners, which rose 37 cents to a record $35.98, and Magellan Midstream Partners, which added 14 cents to a record $36.79.
* Retail shares that moved up as oil and gasoline prices fell included Wal-Mart, up 55 cents to $44.43. The company said it expected August sales at stores open at least one year to be up 2.7%, better than the 2.4% increase in July.
Also in the retail sector, Kohl’s gained 65 cents to $60.95, Guess was up $1.09 to $46.07, and Men’s Wearhouse rose 96 cents to $35.60.
* Another company dependent on consumer spending, El Segundo-based Mattel, jumped 82 cents to $18.73, a 52-week high.
* Nasdaq got a lift from Intel, which rose 48 cents, or 2.5%, to $19.38. Investment firm Friedman, Billings, Ramsey upgraded the shares to “outperform” from “market perform,” citing expectations for improved pricing of computer chips.
Also, Amazon.com gained 88 cents to $28.91 after the online retailer announced plans to repurchase as much as $500 million of stock in its first-ever buyback.
* The Dow utility stock index hit a record high, adding 0.6% to 442.03. The Bloomberg real estate investment trust index also hit a record, up 1% to 236.93. Both sectors have benefited from perceptions that interest rates have peaked.
* U.S. Steel slid $1.18 to $58.50. Brokerage Prudential cut its recommendation to “underweight” from “neutral” on worries about excess steel supplies.
