Stock Market Rallies Even as Oil Prices Rise
Stocks rallied broadly Tuesday, shaking off another rise in oil prices and news that Bolivia had nationalized its natural gas industry.
In other trading, gold surged to yet another 25-year high.
The Dow Jones industrial average jumped 73.16 points, or 0.6%, to 11,416.45, a six-year high that put the index within 307 points, or 2.7%, of its all-time closing high of 11,722.98 reached in January 2000.
Heavy-industry names including Boeing, Caterpillar and General Motors paced the Dow as investors continued to bet the global economy would remain strong.
The Standard & Poor’s 500 index reached a five-year high, gaining 8.02 points or 0.6%, to 1,313.21.
In foreign trading, the Brazilian and Mexican stock markets rose to record highs even though some analysts had worried that Bolivia’s move might frighten investors away from emerging markets.
Instead, investors worldwide seemed to keep their focus on signs of strength in the world economy.
Brokerage JPMorgan said that its index of the global manufacturing sector rose to a 20-month high in April and that firms took on more workers.
In the U.S., with first-quarter profit-reporting season winding down, “we still keep seeing better-than-expected earnings,” said Cummins Catherwood, who helps manage $800 million at Walnut Asset Management in Philadelphia. “That gives me encouragement about our economy.”
Many investors also remain hopeful that the Federal Reserve soon will pause in its credit-tightening campaign. Central bank policymakers meet next week and are expected to raise their benchmark rate another quarter point, to 5%.
In one weak note on the economy, the National Assn. of Realtors said Tuesday that contracts to buy previously owned U.S. homes fell in March to a two-year low.
Some analysts say a slowdown in the housing market might be enough to persuade the Fed to go on hold after next week’s expected rate hike.
“The consensus appears to be a likely pause in June as the Fed assesses the effects of past rate hikes on consumers and the housing sector,” said William O’Donnell, head of U.S. government bond strategy at UBS Securities.
The Realtors’ report helped push Treasury bond yields down from four-year highs. The 10-year T-note ended at 5.11%, down from 5.14% on Monday.
Late Monday, stocks sold off and bond yields rose after CNBC reported that Fed Chairman Ben S. Bernanke was concerned that investors perceived him as being “dovish” on interest rates and inflation.
But markets didn’t dwell on that report Tuesday. Stronger-than-expected quarterly earnings from insurer St. Paul Travelers, diversified manufacturer Emerson Electric, utility giant TXU and agricultural processor Archer Daniels Midland encouraged investors to buy stocks, analysts said.
St. Paul jumped $2.20 to $45.60, Emerson rose $1.11 to $86.53, TXU rocketed $7.59 to $57.50 and Archer Daniels soared $3.90 to $41.90.
On the New York Stock Exchange, winners topped losers by more than 7 to 4.
The technology sector lagged behind blue chips, however. The Nasdaq composite index edged up 5.05 points, or 0.2%, to 2,309.84.
Among the day’s highlights:
* Near-term crude oil futures in New York rose 91 cents to $74.61 a barrel, nearing the record high of $75.17 reached April 21, after Iran threatened to attack Israel in response to any “evil” act by the U.S. against Iran’s nuclear energy program.
Energy prices also were pushed up by fears that other emerging economies might follow Bolivia’s example in nationalizing its energy resources, which could make major oil and gas companies less willing to explore abroad.
Energy stocks, however, moved up. Exxon Mobil rose $1.25 to $64.67 and Occidental Petroleum gained $2.13 to $106.42.
* In the Dow, Boeing rose $1.47 to $85.33 and Caterpillar advanced $1.85 to $77.48. GM was up 57 cents to $23.21 despite reporting lower April sales.
* Among emerging markets, Mexico’s main stock index jumped 2.1% to a record 21,079.87. Brazil’s index was up 1.6% to a record 41,016.50 even though Brazil’s state oil company, Petrobras, was among the companies whose Bolivian assets were seized.
Petrobras’ U.S.-traded shares were up $2.33 to $102.17.
* Most gold and silver mining stocks rose as gold futures rallied $7.20 to $664.70 an ounce, the highest since 1980. Silver futures soared 25.8 cents to $14.11 an ounce. Goldcorp surged $2.09 to $38.13 and Glamis Gold jumped $1.99 to $41.15.
But shares of two U.S.-based metals producers with interests in Bolivia declined. Apex Silver Mines tumbled $3.30 to $17.70 and Coeur d’Alene Mines lost 57 cents to $6.31.
* Hovnanian Enterprises led home builders’ shares lower, falling $2.39 to $36.39, after the company said fiscal second-quarter earnings and new orders fell.
* San Diego-based Vical zoomed $1.69 to $7.19 after the company said its experimental vaccine protected mice and ferrets against death from the H5N1 bird-flu strain that’s killed at least 113 people worldwide.
