Stocks climb despite oil concerns
Wall Street managed a modest gain Wednesday after investors fretted over the effect of falling oil prices but were nonetheless inspired to buy after upbeat news from Alcoa and Apple.
The market began the session with concern that oil’s decline would hurt profit in the energy sector and scare off money from sources such as hedge funds that have helped push stocks higher in recent months. Adding to that sense was a profit warning from Chevron. Investors’ unease about sliding prices was a marked departure from the climate seen last summer and in subsequent months, when rising oil raised the specter of a jump in inflation.
Investors eventually turned their attention to bullish news such as word that US Airways Group raised its bid for Delta Air Lines by 20% to $10.2 billion. Apple also continued its advance, one day after releasing long-awaited plans for a mobile phone.
“There are good underlying economic fundamentals,” said Al Goldman, chief market strategist with A.G. Edwards & Sons. “The buyers are starting to get a little more courageous in coming off the sidelines. Markets take a rest, and the sellers do their dastardly deeds and the buyers become a little more aggressive and then you lift up.”
The Dow Jones industrial average rose 25.56 points, or 0.2%, to 12,442.16.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 2.74 points, or 0.2%, to 1,414.85, and the Nasdaq composite index rose 15.50 points, or 0.6%, to 2,459.33.
Bond yields rose on the slide in oil prices and after a report that the U.S. trade deficit narrowed in November. Both trends were seen as boosting the economy, and perhaps leading to a rise in interest rates. The yield on the benchmark 10-year Treasury note rose to 4.69%, from 4.66% on Tuesday.
The dollar rose against other major currencies after the Commerce Department said the trade deficit unexpectedly fell for a third straight month in November. The euro fell 0.006 cent to $1.294.
Wednesday’s trading resembled that of Monday, in which stocks were lower for much of the session before moving higher near the close. The gains Wednesday weren’t widespread, however, as advancing issues nearly equaled decliners on the New York Stock Exchange.
Crude oil futures sank $1.62 to $54.02 a barrel on the New York Mercantile Exchange. Prices have been hurt as unseasonably high temperatures have weakened demand for home heating oil in large parts of the U.S and Europe. Oil fell further Wednesday after weekly domestic inventory data from the Energy Department showed a drop of 5 million barrels of crude and an increase of 5.4 million barrels of distillates such as home heating oil.
In other market highlights:
* Intel and Sun Microsystems rallied after a report from Bear Stearns that computer-related companies would benefit from faster economic growth.
Intel climbed 49 cents to $21.52. Sun, the world’s third- largest maker of server computers, added 27 cents to $6.
Nvidia soared $1.64, or 4.9%, to $34.89. Customers of the graphics chip maker are replenishing inventories after a shortage of microprocessors from Advanced Micro Devices was resolved, Bear Stearns said in a note. Advanced Micro gained 36 cents to $20.01.
* Not all tech companies advanced. IBM dropped $1.18 to $98.89 after it was reduced to “hold” from “buy” at A.G. Edwards & Sons on concern that sales growth would slow.
* Chevron’s profit warning sent the company’s stock down $1.22 to $69.41. The company also cited lower production and lower earnings from refining.
* US Airways raised its offer for Delta, hoping to pressure the struggling airline’s creditors to sign off on a deal that Delta has come out against. Investors applauded US Airways’ move; the stock increased $1.03 to $58.93. Delta climbed 10 cents, or 7.7%, to $1.40.
* Apple, which dropped the word computer from its name to reflect its continued push into other spheres, rose $4.43, or 4.8%, to $97. The advance followed the stock’s $7.10 increase Tuesday, when the company unveiled its iPhone.
But Motorola slipped 10 cents to $18.16 on concern the mobile phone maker may not be able to sustain its domestic market share once Apple launches the iPhone in June.
* Aluminum producer Alcoa, one of the 30 stocks that make up the Dow industrials, advanced $1.71, or 6%, to $30.23, after reporting after the market close Tuesday that its fourth-quarter profit jumped 60%.
* Placer Sierra Bancshares rose $3.66, or 15.6%, to $27.19 after the regional bank agreed to be acquired by financial services company Wells Fargo in a stock swap worth about $645 million. Wells Fargo was off 11 cents at $35.48.
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Bloomberg News was used in compiling this report.
