Late buying spree raises US stocks

US stocks raced ahead in a late surge of bargain hunting today, as oil prices stepped back from their highs.

The Dow Jones industrial average jumped more than 120 points.

Trading has been muted all week due to the Republican National Convention in New York and the forthcoming Labour Day holiday.

Today, investors were looking ahead to a key mid-quarter update from chipmaker Intel, due after the close of regular trading, and US employment figures scheduled to be announced tomorrow.

But the markets grew more upbeat as rumours swirled among traders that President George Bush might allude to new signs of job growth in his speech on the final night of the convention.

On Wall Street, the Dow soared 121.82, or 1.2%, to 10,290.28.

The broader gauges also rose sharply. The Nasdaq composite index added 23.02, or 1.2%, to close at 1,873.43. The Standard & Poor’s 500 index gained 12.40, or 1.1%, to 1,118.31.

In economic news, worker productivity rose a disappointing 2.5% in the spring, the smallest gain since late 2002.

The figures from the Labour Department, which measures the amount an employee produces for every hour on the job, missed economists’ estimates for a rise of 2.8%, and was down sharply from the 3.7% pace posted in the first quarter.

In a second report, the department said the number of new people signing up for unemployment benefits rose for the second week in a row, reflecting the lingering impact of Hurricane Charley.

Economists were expecting claims to go down.

Separately, orders to US factories grew by 1.3% in July, following a 1.2% advance in June. The increase was led by a big jump in demand for commercial aircraft and parts. Orders for non-durable goods, such as food products and chemicals, rose 1% for a second straight month.

Crude prices climbed after Russia’s largest oil producer, Yukos, warned of a possible production halt following a Moscow court’s decision to freeze its assets as part of an ongoing battle over back taxes. Light, sweet crude for October delivery was up 15 cents at 44.15.

Investors were also holding their collective breath as Hurricane Frances took aim at Florida’s eastern coast, less than three weeks after Hurricane Charley struck the state, pushing the nation’s jobless claims higher and denting retail sales in the south east.

The fact that the market was up in spite of so many negative factors was cause for optimism, analysts said, and perhaps a sign that investors were setting aside some of the worries that kept them on the sidelines during the summer.

Bill Groenveld, head trader for vFinance Investments, said: “The Olympics? No terrorism. Democratic convention? No terrorism. And now we’re getting this other one out of the way,” Groenveld said.

“The market is kind of getting that funny feel like we might have seen the last of this downtrend. People are shrugging things off, we’re feeling better … I think we cold be setting ourselves up for a decent fourth quarter as long as everyone plays nice through the presidential election.”

Retailers reported a third consecutive month of weak sales, as low-to-middle income shoppers became more frugal in response to rising energy and grocery bills and growing worries about the job market.

Wal-Mart, the world’s largest retailer, was up 39 cents at 53.02 despite reporting a slim 0.5% increase in sales, missing Wall Street forecasts for a rise of 1.5%. Based on disappointing sales, Wal-Mart said it now believed third-quarter profits would be at the low end of its forecast.

Costco Wholesale Corp was down 42 cents at 40.41 after reporting a 4% gain in sales, missing estimates of a 7.3% rise.

Intel was up 20 cents at 21.63 ahead of its mid-quarter update, due after the close of regular trading.

The outlook from Intel, the world’s largest manufacturer of computer chips, is seen as a harbinger of things to come throughout the tech sector. Some analysts said slower growth in the chip industry has already been factored into prices.

Advancing issues outnumbered decliners nearly 2 to 1 on the New York Stock Exchange.

The Russell 2000 index, which tracks smaller company stocks, was up 7.32, or 1.3%, at 559.78.

After the market closed, Intel lowered its financial outlook.

The computer giant said its third-quarter revenue would range from 8.3 billion to 8.6 billion.

Management previously forecast revenue ranging from 8.6 billion to 9.2 billion for the three months ending September 25.

Gross profit margins are now expected to be within a couple of points of 58%, compared with the earlier guidance of about 60%.

Intel shares rose 20 cents to close at 21.63 on the Nasdaq Stock Market before the release, then fell 1.73 in extended trading.