Stocks gain as yields, oil prices fall back
Share prices edged higher in an erratic session Monday as stock investors were reassured by a drop in Treasury bond yields but remained cautious with second-quarter earnings season kicking off this week.
Investors were looking to corporate earnings to help give the market direction in the coming weeks. After the closing bell, Alcoa, the first major company to report, said second-quarter profit dipped 4% but matched analysts’ projections. Alcoa shares rose 70 cents, or 1.7%, to $42.36 in regular trading, and inched up to $42.48 after hours.
Wall Street found some solace as the yield on the benchmark 10-year Treasury note slipped to 5.14% from 5.18% late Friday. There had been concern that a steady rise in bond yields since June would crimp merger deals.
The Dow rose 38.29 points, or 0.3%, to 13,649.97, coming within 7 points of its record close set last month before falling back.
The Standard & Poor’s 500 index rose 1.41 points, or 0.1%, to 1,531.85, and the Nasdaq composite index added 3.51 points, or 0.1%, to 2,670.02.
The Russell 2,000 index of smaller-company stocks rose 0.93 point, or 0.1%, to 853.24.
Advancing issues outpaced decliners 4 to 3 on the New York Stock Exchange, where consolidated volume came to 2.68 billion shares, from 2.39 billion Friday.
Last week, Wall Street began the third quarter with positive data on the job market and the manufacturing and service sectors and managed to finish Friday with a respectable gain. For the week, the Dow rose 1.5%, the S&P; 500 rose 1.8% and the Nasdaq advanced 0.1%.
Monday was a light day for data. The Federal Reserve reported that consumer credit rose at an annual rate of 6.4% in May, far above April’s 1.1% gain and above analysts’ estimates.
In addition to earnings, investors will be watching oil prices, which have been trading at their highest levels since August. So far, high energy prices haven’t hurt consumer spending, but any sign that inflationary pressures are worsening could raise worries on Wall Street about an interest rate hike.
Crude futures fell 62 cents to $72.19 on the New York Mercantile Exchange. The dollar was lower against other major currencies, while gold jumped.
Buyout activity continued Monday, extending the drumbeat of takeovers that has given the stock market support in recent months. Apollo Management’s Hexion Specialty Chemicals raised its takeover bid for chemical company Huntsman by 2.8% to $28 a share. Huntsman shares rose 7 cents to $28.07.
FedEx surged $5.33, or 4.8%, to $116.17 after Barron’s magazine reported that the package delivery company could become a target for private equity buyers because of its modest valuation and turnaround potential.
Shareholders of CBOT Holdings approved a merger with Chicago Mercantile Exchange Holdings, a deal that would create the world’s largest derivatives exchange. CBOT shares fell $1.18 to $222.82. Chicago Mercantile shares fell $4.22 to $570.58. InterContinental Exchange, which also had bid on CBOT, rose 69 cents to $156.78.
In other market highlights:
* Boeing rose $1.02, or 1%, to $99.90 on reports that it could soon receive more than $100 billion in orders for its 787 Dreamliner jet, unveiled Sunday.
* Diesel engine manufacturer Cummins soared $11.15 to a record $117.64 after a Bear Stearns analyst predicted the stock would hit $130 next year. He cited rising demand for lower-emission diesel engines.
* Intel climbed 28 cents, or 1.1%, to a 52-week high of $24.96. The chip maker said it would take a $219-million stake in VMware in the EMC unit’s pending public offering.
* Pharmaceutical and consumer product giant Johnson & Johnson said its board approved the repurchase of as much as $10 billion of its stock. Its share price rose 59 cents, or 1%, to $62.72.
* Children’s Place Retail Stores tumbled $6.12, or 12%, to $46.42. The retailer said same-store sales dropped 4% in the five weeks ended July and expects to report a second-quarter loss of 94 cents to 98 cents.
* Huntington Bancshares fell 79 cents, or 3.5%, to $21.85. The Ohio-based company warned it would report second-quarter earnings below expectations in part because of an increase in provisions for loan losses.
* Overseas, key stock indexes rose 0.7% in Japan, 0.3% in Britain and 0.4% in Germany. French stocks edged up.
