Late-day bounce leaves stocks higher
NEW YORK » A late-day rally gave stocks a moderate advance yesterday as a second day of sharply lower oil prices calmed investors uncertain about the direction of interest rates.
Better-than-expected earnings from Coca-Cola Co. and United Technologies Corp. propped up the Dow Jones industrials, while mild wholesale inflation data also lent some support to the market. But concerns about conflict in the Middle East made investors uneasy about buying: Stocks spent most of the session lower before recovering late in the day.
John Forelli, portfolio manager for Independence Investments, said traders were bracing for Federal Reserve Chairman Ben Bernanke's appearance before Congress today.
"It's the first time in a while I can remember that we were within three weeks of a Fed meeting and Fed fund futures were 50-50," Forelli said, meaning the market is divided on whether the central bank will boost interest rates when it meets Aug. 8. "Bernanke tomorrow could be a linchpin for a rally or continued malaise in the trading range we've seen."
While a modest rise in core producer price index helped the inflation picture, analysts said the stronger-than-forecast gain in overall PPI raised the possibility of more rate hikes from the Fed and also unnerved the bond market. Downbeat housing data renewed fears about an economic slowdown.
The Dow climbed 51.87, or 0.48 percent, to 10,799.23, after sinking as much as 63 points earlier.
Broader stock indicators also recouped early declines. The Standard & Poor's 500 index gained 2.37, or 0.19 percent, to 1,236.86, and the Nasdaq composite index rose 5.50, or 0.27 percent, to 2,043.22.
Advancing issues overtook decliners by 6 to 5 on the New York Stock Exchange.
Preliminary consolidated volume on the NYSE was 2.58 billion shares, which led the 2.24 billion shares that changed hands Monday.
The Russell 2000 index of smaller companies gained 3.95, or 0.58 percent, to 681.64.
A barrel of light crude jumped to $76.55 but fell $1.76 to settle at $73.54 on the New York Mercantile Exchange.
Elsewhere, the U.S. dollar fell against the Japanese yen. Gold dropped to $630 an ounce.
The yield on the 10-year Treasury jumped to 5.14 percent from 5.07 percent late Monday.
In economic news, the U.S. Labor Department said PPI grew 0.5 percent in June, ahead of estimates for a 0.3 percent rise. Core PPI -- excluding volatile energy and food costs -- increased 0.2 percent to meet analyst expectations.