Nervous investors send stocks higher in volatile session
Stocks ended higher in volatile trading Thursday as investors weighed fears about mounting tension in Iran against a report that indicated better-than-expected U.S. economic growth.
The major indexes bounced around and spent most of the session looking for direction as crude prices surged to a six-month high. Oil crossed the $66 mark as investors remained nervous about the West’s response to British sailors being held captive in Iran.
This offset the Commerce Department’s final measure of fourth-quarter gross domestic product, which showed growth of 2.5%. That could help quell concerns that the economy is slowing too quickly. At the same time, strong economic growth could make it harder for the inflation-wary Federal Reserve to cut short-term interest rates.
Investors also bought and sold stocks to window-dress their portfolios ahead of Saturday’s end of the first quarter. The modest advance snapped a three-day losing streak for the Dow Jones industrials.
“The market is at a pivotal point,” said Scott Fullman, director of investment strategy for Israel A. Englander & Co. “The market has become more volatile, and more sensitive, to news items.”
The Dow rose 48.39 points, or 0.4%, to 12,348.75. The index climbed as high as 12,381.91 during the morning session.
Broader stock indicators also finished higher. The Standard & Poor’s 500 index rose 5.30 points, or 0.4%, to 1,422.53, and the Nasdaq composite index edged up 0.78 of a point, or less than one-tenth of a percent, to 2,417.88.
Bond yields rose, with the benchmark 10-year Treasury note rising to 4.65% from 4.62% on Wednesday. The dollar fell against other major currencies, and gold prices tumbled.
Oil prices extended their gains Thursday after settling at their highest level since mid-September on Wednesday amid political tensions in the Middle East. Declining U.S. supplies amid high demand also drove up prices.
Crude oil futures rose $1.95 to $66.03 a barrel in New York trading.
The recent rise in oil prices generally poses a concern as increased energy costs could curb consumer spending and add to inflationary pressures.
Wall Street got little feedback from policymakers after a number of Fed officials gave speeches. Federal Reserve Bank of Minneapolis President Gary Stern was upbeat about the U.S. economy but refrained from connecting that outlook to the future path of monetary policy.
Richmond, Va., Fed President Jeffrey Lacker did not address the economy in his remarks at a community affairs research conference in Washington. He instead spoke about the recent rise in consumer credit defaults being caused by borrowers’ mistakes and problems with lender risk assessments.
Earlier in the session, the Labor Department released a report that showed that the number of newly laid-off workers signing up for unemployment benefits last week declined. This suggests the job market is still in good shape even as the economy goes through a sluggish spell.
In other market highlights:
* U.S. Steel announced it would acquire Lone Star Technologies for $2.1 billion, which represents a 39% premium. U.S. Steel rose $3.61, or 3.7%, to $101.22; Lone Star surged $17.66, or 36.5%, to $65.11.
* RF Micro Devices, which makes radio frequency components, warned that weaker demand from a major customer would hurt its first-quarter results. Shares fell 76 cents, or 10.8%, to $6.31.
* Circuit board maker Multi-Fineline Electronix of Anaheim said its second-quarter sales and profit could decline from the first quarter. The stock fell $1.95, or 11.2%, to $15.55.
The Russell 2,000 index of smaller companies rose 1.54 points, or 0.2%, to 798.94.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 2.81 billion shares, down from 2.88 billion on Wednesday.
Japan’s Nikkei stock average closed up 0.05%. Britain’s FTSE 100 was up 0.9%, Germany’s DAX index added 1.2%, and France’s CAC-40 rose 1.4%.
