Markets & Finance

Stocks End Higher as Oil Prices Fall


Stocks finished higher on Wednesday. Cooling oil prices helped spur an afternoon pop, led by IT stocks, amid some soft economic data. The Nasdaq ended the day more than 1% higher.

The Dow Jones industrial average added 83.11 points, or 0.82%, at 10,181.74. The broader Standard & Poor's 500 index ended up 8.77 points, or 0.79%, to 1,104.96. The tech-heavy Nasdaq composite index gained 23.83 points, or 1.28%, to 1,860.72, as semiconductor stocks recouped their Tuesday losses.

The sudden move higher in stocks was widely attributed to a rather swift fall in oil prices early in the afternoon. But Peter Cardillo, chief market analyst at S.W. Bach, warns that "when you have low volume, prices can get exaggerated on both sides of the equation."

The October West Texas Intermediate (WTI) crude oil price skidded about 4% to below $43.50 per barrel. S&P's MarketScope reports that some traders are saying that if the price of a barrel of oil falls below $42.50, then the lengthy rally could be over. However, traders caution that the market is still event-sensitive.

Data from the U.S. Energy Information Agency show that crude oil inventories fell 1.7 million barrels in the latest week -- while the American Petroleum Institute (API) says they fell by 3.4 million -- against expectations of a half million barrel rise, reports Informa Global Markets. Gasoline inventories were flat, while API says they rose by 1.5 million barrels. Traders were focused on the reported rise in gasoline supply.

Meantime, gold stocks and yellow metal prices were higher -- up to roughtly $410 -- on fears of a terrorist attack during the U.S. Republican National Convention in New York next week, and two passenger plane crashes in Russia overnight, reports S&P MarketScope.

In economic news, July durable goods orders rose 1.7% (orders rose 1.1% in June), somewhat higher than was forecast. But most of the gains were in the transportation sector, which gained 5.6% thanks to aircraft sales -- auto orders fell 5.3%, while aircraft orders surged 100.4%. Excluding defense, orders were up 2.7%, and excluding transport climbed just 0.1%. Core capital goods shipments rose 1.4%, "so capital spending in the third quarter gets off to a healthy start," says Informa Global Markets.

Homebuilder and building products stocks were suffering on news that fewer new homes were sold in the U.S. in July. New home sales dropped 6.1% in the month, to a 1.134 million pace, which is somewhat softer than was expected, but still healthy. The only region to report a rise was the Midwest, where sales rose 21.5%. The median price of new homes sold fell 3.9% to $207,400.

Federal Reserve Chairman Alan Greenspan said that the global economic recovery "has become both stronger and more sustainable" over the past year, reports S&P MarketScope. His comments came in response to a written query from the Senate Banking Committee. He added that the "pace of recovery in the euro area has been sluggish, however, with particularly weak activity in Germany."

In corporate news, Boeing (BA) shares climbed 3.1% on news that Singapore Airlines plans to buy up to 31 of its 777-300ER aircraft, a sale valued at about $7.35 billion.

Luxury home builder Toll Brothers (TOL) reported solid third-quarter results, and gave a bullish fiscal 2005 outlook, including at least a 30% rise in net income growth, and a 25% rise in earnings per share. Shares finished lower, as the good news was outweighed by softer-than-expected home sales data.

Semtech (SMTC) added 6% after reporting strong quarterly earnings after Tuesday's session. The integrated circuits supplier says that sales rose 53% in the second quarter vs. the same period last year. Morgan Stanley raised its estimates of Semtech, while S&P kept its hold rating.

H&R Block (HRB) reported a first-quarter loss of 26 cents per share, vs. 3 cents a year ago, on a 2.6% revenue decline. The company cited decreased mortgage segment income, and additional costs associated with expanding its tax business. Morgan Stanley cut its estimates of H&R Block, while S&P kept its hold rating. Shares lost 5.5%.

Ditech Communication (DITC) shares jumped 15% after the company posted first-quarter earnings of 30 cents, vs. a loss of 32 cents, on a sharp revenue rise. The telecommunications equipment company sees second-quarter revenues up as much as 10%. First Albany raised its estimate and reiterated a strong buy rating.

Williams-Sonoma (WSM) reported better-than-expected second-quarter earnings on a 5% rise in same-store sales, and a 19% total revenue rise. Raymond James upgraded shares to strong buy. Shares rose 10%.

The remainder of the week's economic calendar is thin. Thursday brings a read of initial jobless claims, followed by Friday's second-quarter gross domestic product revision and final Michigan consumer sentiment for August.

Also on Friday, Greenspan will speak on demographic changes at the Kansas City Fed's annual monetary policy conference in Jackson Hole, Wyoming. Analysts don't expect Greenspan to talk about Fed policy.

The week's earnings calendar finishes with quarterly updates from Krispy Kreme (KD) on Thursday, and Dollar General (DG).

Treasury Market

U.S. Treasuries finished mixed in price on Wednesday, off their morning gains as stocks rose, and traders reacted to some "sloppy" results of the two-year note auction, reports Informa Global Markets.

In currencies, the dollar was flat against major currencies, following its Tuesday gains. The euro was worth $1.208, the British pound was at $1.796, while the U.S. dollar was at 110.13 yen.

World Markets

European stock markets finished somewhat higher on Wednesday as oil prices fell for the fourth day. London's Financial Times-Stock Exchange 100 index added 4.1 points, or 0.09%, to end at 4,411.6, amid worry about a sluggish European economy.

Germany's DAX index ended up 17.88 points, or 0.47%, to 3,788.88, despite a reported revision of Germany's June industrial production levels -- down 1.4% -- from the government. The European Central Bank president says that higher oil prices would not ruin a second half economic recovery.

In Paris, the CAC 40 index gained 0.88 point to 3,595.26.

Asian markets finished higher on Wednesday. Japan's Nikkei 225 index added 144.69 points, or 1.32%, to close at 11,130.02. In Hong Kong, the Hang Seng index gained 146.54 points, or 1.16%, to close at 12,793.03.


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