GM deal, tobacco ruling help stocks close higher
NEW YORK » Wall Street rallied to finish moderately higher yesterday as nervous investors got some reassurance from General Motors Corp.'s new labor agreement and a favorable court ruling for cigarette makers. Technology stocks rebounded.
GM's tentative union deal calmed investors who feared worsening finances at the struggling automaker. The market also got a lift from strong quarterly earnings in the financial sector and the Supreme Court's refusal to let the government pursue a $280 million racketeering penalty against tobacco firms.
The upbeat news helped offset rising crude oil, which added nearly $2 a barrel as a strengthening Tropical Storm Wilma posed yet another threat to the Gulf Coast region. A barrel of light crude climbed $1.73 to settle at $64.36 on the New York Mercantile Exchange.
Ed Peters, chief investment officer at PanAgora Asset Management, said that while corporate earnings have so far been positive, high oil and gas prices and continued speculation about the Federal Reserve's interest rate-tightening campaign have been holding back the market.
"I think there's still uncertainty about how far the Fed is going to go, and uncertainty about the effect of higher energy prices on the economy," Peters said. "We're seeing a modest bounceback, but it doesn't seem to have a lot of conviction."
At the close of trading, the Dow Jones industrial average gained 60.76, or 0.59 percent, to 10,348.10.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 3.53, or 0.3 percent, to 1,190.10, and the Nasdaq composite index added 5.47, or 0.26 percent, to 2,070.30.
Tech investors received good news after the session, when International Business Machines Corp. said its third-quarter profit dipped but still beat Wall Street targets by 13 cents per share on strength in its services unit. IBM rose 24 cents to close at $82.59, and gained another $1.09 in after-hours activity.
Meanwhile, the Supreme Court ruling sent shares of tobacco companies surging, with Phillip Morris USA parent Altria Group Inc. rising $4.30 to $74.96, and rival Reynolds American Inc. adding $5.06 to $83.80.
In the financial sector, Citigroup saw a 35 percent jump in quarterly profit, due in part to the sale of its life insurance and annuities businesses. Without one-time charges, the company beat analysts' estimates by 4 cents per share. Nonetheless, Citigroup gave back earlier gains and fell 23 cents to $44.81.
Charles Schwab Corp. posted its largest quarterly profit since the dot-com era, reversing a year-ago loss on sturdy asset growth. The discount brokerage beat Wall Street targets by a penny per share. Schwab rose 21 cents to $13.34.