Stocks eke out gain despite oil price spike
NEW YORK » Wall Street ended a volatile session marginally higher yesterday after stocks first surged on robust retail sales numbers but pared their gains as oil prices spiked.
The U.S. Energy Department reported crude inventories fell for a third straight week, which sent oil and gasoline prices sharply higher.
The supplies data essentially offset a robust retail sales report that showed strong consumer spending in November. Investors had sent stocks higher on belief higher household spending will drive corporate profits, and help push economic growth.
This helped soothe Wall Street's concerns that the economy is moderating too fast, but also indicated that the Federal Reserve won't cut interest rates anytime soon. The report caused a sell off in the Treasury bond market -- which had been hoping for a rate cut as soon as the first quarter.
"I think the oil report is more noise in the background that can drive things intraday, but doesn't rule in the long term," said Jeff Kleintop, chief investment strategist for PNC Financial Services Group. "The real data point is how the next two weeks of the shopping season is, which will give us a better idea of the strength of the consumer and an idea of when the Fed may ease next."
The Fed on Tuesday kept interest rates steady at a regularly scheduled policy-making meeting.
The Dow Jones industrial average added 1.92, or 0.02 percent, to 12,317.50, having pulled back after reaching a new trading high of 12,368.61 earlier in the session. Broader indicators edged higher.
The Standard & Poor's 500 index was up 1.65, or 0.12 percent, at 1,413.21, and the Nasdaq composite index rose 0.81, or 0.03 percent, to 2,432.41. The Russell 2000 index of smaller companies rose 0.34, or 0.04 percent, to 788.75. Advancing issues outnumbered decliners by 3 to 2 on the New York Stock Exchange, where consolidated volume came to 2.59 billion shares, compared to 2.71 billion Tuesday.
Treasury prices dropped on the belief that a hoped-for rate cut early next year won't be in the offing. Yields in turn moved sharply higher, with the benchmark 10-year Treasury note jumping to 4.58 percent from 4.48 percent late Tuesday.
Oil prices rallied after the U.S. government reported crude supplies fell by 4.3 million barrels last week, a bigger drop than analysts expected.
The price of a barrel of light, sweet crude was up 35 cents at $61.37 on the New York Mercantile Exchange.
The retail sales report also injected confidence in the dollar, which rose against other major currencies on the prospect of stable U.S. rates. Gold prices also moved higher.