A drop in oil prices and upbeat outlooks from Wal-Mart and Lowe’s prompted some bargain-hunting on Wall Street, sending stocks sharply higher today, with the swing exaggerated by thin late summer trading. The Dow Jones industrials surged nearly 130 points higher.
Volume was light on Wall Street, even as the retail sector’s rare good news helped shares, as many investors were tentative about the rally, hoping for better economic news in the week ahead.
A critical reading on consumer prices and inflation was expected tomorrow.
Falling oil prices spurred by the orderly recall vote in Venezuela, the Western Hemisphere’s largest oil producer, also helped shares recover from last week’s volatile trading.
A barrel of light crude was quoted at 46.05, down 53 cents, on the New York Mercantile Association.
“Everything is priced into oil being as high as it is,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “You see oil go down, stocks will go up. Plus, this market is really cheap right now, so it’s going to be pretty attractive for buyers.”
According to preliminary calculations, the Dow Jones industrial average gained 129.20, or 1.3%, to 9,954.55.
Broader stock indicators were also higher. The Standard & Poor’s 500 index advanced 14.54, or 1.4%, to 1,079.34. The Nasdaq composite index was up 25.62, or 1.5%, at 1,782.84.
The market shrugged off a disappointing drop in the US Empire State Manufacturing Index, a measure of industrial activity in the New York area.
According to the Federal Reserve Bank of New York, the index came in at 12.6 in August, the lowest reading since May 2003, and down from 35.6 in July. Any reading above zero means expansion in manufacturing has occurred.
Investors got some comfort after initial results suggested Venezuelan President Hugo Chavez won a recall referendum, easing fears of a disruption in supply from the world’s fifth-largest exporter.
A smooth start to the Olympic Games in Athens also helped reduce fears of terrorism.
However, coming off of last week’s volatile trading, most analysts were not looking to today’s gains as a sign that the markets were ready for a serious rally.
“You can’t read anything into these one-day snap-backs,” said Bryan Piskorowski, market analyst at Wachovia Securities. “The volume’s not there, for one, and you really need to put together a string of these before you start talking about a turn around. But hey, it’s a nice one-day rally and we’ll take it.”
Wall Street will be looking closely at tomorrow’s consumer price index, hoping to see signs that the rise in oil prices this summer have not unduly affected the price of goods and services.
A better-than-expected reading could result in an extension of today’s rally, while a poor reading will likely result in a selloff, analysts said.
Dow component Wal-Mart Stores Inc. was up 90 cents at 54.30 after reporting in a weekly update that sales for August were in line with expectations so far, partly due to brisk business in the southeast as customers prepared for hurricane season.
Lowe’s Cos. Inc. rose 2.49 to 49.14 although its earnings missed Wall Street estimates by 2 cents a share, largely because bad weather dented sales in June, it reported a 17.9 percent increase in net income and raised its outlook for the current quarter.
Kmart Holding Corp. surged 17 percent, or 11.15, to 76.05 after the company posted its third consecutive quarterly profit after emerging from bankruptcy last year. Sales continued to fall, however.
Shares of Gateway Inc. climbed 33 cents to 4.11 after the struggling computer company announced that CompUSA Inc. would begin selling its desktop products later this week. The decision follows the closure of its 188 retail stores in April.
Advancing shares outnumbered decliners by about 4 to 1 on the New York Stock Exchange.
Volume came to 1.2 billion shares, compared to 1.17 billion on Friday.
The Russell 2000 index of smaller companies was up 10.67, or 2.1 percent, at 528.06.