Stocks get boost as oil drops $3 a barrel
NEW YORK » Wall Street shook off early doldrums and closed sharply higher yesterday after another drop in oil prices encouraged investors to set aside financial sector worries and go bargain hunting across the market. The Dow Jones industrial average rose more than 130 points.
Stocks initially fell on uneasiness about the continuing impact of the housing market downturn and the credit crisis on financial company earnings. Disappointing results from American Express Co. and Wachovia Corp. fed those worries.
But a $3 drop in oil -- which took crude's decline in recent weeks to nearly $20 a barrel -- persuaded some investors to wade back into equities.
Even Wachovia, the nation's fourth-largest bank, shot 27 percent higher after its stock tumbled to levels not seen since the early 1990s. The stock was pummeled after the retail bank posted an $8.9 billion loss because of charges and reserves for bad mortgage loans.
"There's been so many people speculating about oil taking off and how to handle it, the whole economy has been focused on it," said Todd Leone, managing director of equity trading at Cowen & Co. "Just the fact that it has dropped -- a big move down -- helps out. There's the perception that this will get the economy going again."
The Dow rose 135.16, or 1.18 percent, to 11,602.50. The blue chip index rose 400 points last week, but ended Monday's session slightly lower.
Broader indexes also rose yesterday. The Standard & Poor's 500 index jumped 17.00, or 1.35 percent, to 1,277.00. The technology-dominated Nasdaq composite index, which was down for much of the session on tech earnings disappointments, ended up 24.43, or 1.07 percent, at 2,303.96.
The Russell 2000 index of smaller companies rose 19.19, or 2.75 percent, to 716.82.
Advancing issues outpaced decliners by more than 2 to 1 on the New York Stock Exchange, where about 6.04 billion shares changed hands in consolidated trading compared with about 4.5 billion shares on Monday.
The price of oil began the session mildly lower on expectations that Tropical Storm Dolly wouldn't disrupt oil operations in the Gulf of Mexico. The advance increased after comments from a Federal Reserve official sent the dollar higher against major currencies, a trend that in turn sends commodities lower.
A barrel of light, sweet crude tumbled $3.09 to settle at $127.95 on the New York Mercantile Exchange, down nearly $20 from its record high of $147.27, reached just weeks ago.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.10 percent from 4.04 percent late Monday. Government debt also weakened as investors moved into equities.
Investors will get more data with some 158 members of the S&P 500 expected to report this week, the busiest since second-quarter earnings season began earlier this month.