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Petroleum Supplies Boost Stocks
Wall Street stocks rallied today after the nation's supply of petroleum grew larger than expected last week, triggering a sharp sell-off in crude oil futures.
The Dow Jones industrial average closed above the 10,000 level after jumping more than 100 points for the second consecutive day. The Dow finished the day at 10,002.03, up 113.55. The Nasdaq, S&P 500 and other major financial indexes also posted solid gains.
Wall Street, worried about the economic impact of rising oil prices, has welcomed any sign that energy prices might be easing. The threat posed by high gasoline and fuel prices has obscured a healthy increase in corporate earnings, said Dick Green, president of Briefing.com, an investment advisory firm.
"We think there is a lot of latent bullishness," Green said. But "these high oil prices do create a risk of a significantly slower economy" in 2005.
Investors bid up stocks today following turmoil in energy markets, where crude oil futures for December delivery fell below $53 a barrel after dropping $2.71 on the New York Mercantile Exchange.
The sell-off and frantic trading was set off by a government energy report that showed a larger than expected rise in commercial oil inventories last week. U.S. commercial crude oil inventories rose by 4 million barrels to 283.4 million barrels, according to the U.S. Energy Department. U.S. refineries also boosted production of gasoline and other fuels.
While crude oil inventories still remain far below historical levels, the drop was enough to undermine crude oil futures, which had been approaching record high levels. Some analysts said energy traders were overreacting to the government report, but others saw it as a sign that the recent run-up in crude oil futures cannot be sustained.
"I think prices are being held up by speculative interest," said Green. "I think it can come down further."