US stocks enjoyed a late rally today to finish higher despite a new record price for oil and gloomy third-quarter outlooks from several companies.
Volume was relatively light as investors awaited the government’s jobs creation report at the end of the week.
With rising energy costs threatening to dent consumer spending and corporate profits in the period ahead, oil and jobs have competed for the attention of traders on Wall Street.
Many were looking ahead to the Labour Department’s September employment report, due on Friday. If the number of new jobs created misses expectations, it could be a blow for stocks, particularly retailers.
Analysts are also watching for positive signs in third-quarter earnings reports, following a series of profit warnings.
“What you would hope now is that we’ll see some upside surprises,” said Janna Sampson, co-manager of the AmSouth Select Equity Fund and director of Portfolio Management at Oakbrook Investments. “That could buoy the market and help us take off.
Until we get numbers out of those companies that haven’t warned, I think we’re somewhat directionless. There’s just nothing fundamental to drive the market until then.”
The Dow Jones industrial average rose 62.24, or 0.6%, to 10,239.92, making much of the gain in the final hour of trading.
The broader gauges also closed modestly higher. The Standard & Poor’s 500 index added 7.57, or 0.7%, to 1,142.05. The Nasdaq composite index advanced 15.53, or 0.8%, to 1,971.03.
Light, sweet crude for November delivery settled 93 cents higher at 52.02, as traders examined weekly US inventory numbers.
Crude inventories for the first week of October were up 1.1 million barrels and petrol stocks were also higher, but a 2.1 million barrel decline in distillate fuels, which includes heating oil and jet fuel, suggests consumer spending may come under some pressure this winter.
With third-quarter earnings season just starting, a number of large companies are preparing to issue results, including Costco Wholesale Corp, Marriott International and Alcoa tomorrow, and General Electric on Friday.
“GE’s breadth and industrial base will tell a lot about the condition of the economy,” said Ned Riley, chief investment strategist at State Street Global Advisors.”
Those comments will be watched with quite a bit of interest, simply because of their size and how it reflects the pulse of the consumer on the industrial side.”
Further raising concern about a possible slowdown in consumer spending, Big Lots blamed soft sales in September on the difficult economic environment.
The retail giant adjusted its earnings and sales forecasts to reflect what it sees as a broad-based trend. Big Lots sank 4.6%, or 59 cents, to 12.15.
Also among companies offering bleaker outlooks, stock dealer Knight Trading Group dipped 20 cents to 9.39 after saying it expected an operating loss for the third quarter due to “persistent lacklustre market conditions”.
In Washington, top officials with mortgage giant Fannie Mae, including chief executive Franklin Raines, defended the company’s accounting practices before a House subcommittee.
Regulators have alleged earnings manipulation and management misdeeds at Fannie Mae, which finances one of every five home loans in America. Fannie Mae was up 1.45 at 67.45.
Investors were also eying the ramifications of the shortage of flu vaccine following the British Government’s suspension of Chiron’s manufacturing licence.
Chiron, which provides about half of the flu vaccine used in the US, added 34 cents at 38.32, following an 18% drop on Tuesday. The company slashed its earnings guidance and was downgraded by several brokerage firms.
Sirius Satellite Radio gained 16%, or 52 cents, to 3.87, after shock jock Howard Stern announced he had signed a five-year, multimillion dollar deal with the company to move his show to the fledgling broadcasting service in 2006.
Sirius said it would spend 100 million a year to produce the show, but warned it needed 1 million new subscribers to cover the costs. Sirius had 480,341 subscribers at the end of the second quarter.
The news put pressure on Sirius’s main rival, XM Satellite Radio Holdings, which fell 48 cents to 29.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange.
The Russell 2000 index, which tracks smaller company stocks, was up 5.32, or 0.9%, at 592.66.