Stocks rebounded moderately in New York today as a stronger than expected retail sales report showed that higher oil prices are not scaring consumers off spending.
Federal Reserve Chairman Alan Greenspan’s positive comments on oil prices also encouraged investors, but the major indexes finished the week lower following sharp declines the previous two sessions.
Wall Street has worried for months that soaring oil and gasoline prices would prompt consumers to spend less. But the Commerce Department reported that retail sales jumped 1.5% in September, much more than the 0.6% gain economists forecast.
Reassuring words from Greenspan, who said surging energy costs would have less of an impact on the economy than the energy crisis of the 1970s, cheered investors even as oil prices pushed toward 55 per barrel. A barrel of light crude settled at 54.93, up 17 cents, on the New York Mercantile Exchange.
“The retail sales figures were particularly good news and could have a strong impact in over all GDP (gross domestic product) growth,” said Joseph McAlinden, chief investment officer at Morgan Stanley Investment Management. “And certainly Greenspan’s opinion on the state of the world has helped.”
The Dow Jones industrial average rose 38.93, or 0.39%, to 9,933.38, regaining some ground after a 153-point drop over Wednesday and Thursday.
Broader stock indicators were modestly higher. The Standard & Poor’s 500 index was up 4.91, or 0.45%, at 1,108.20, and the technology-focused Nasdaq composite index gained 8.48, or 0.45%, to 1,911.50.
Despite today’s gains, stocks ended the week lower. The sharp climb in crude oil futures weighed heavily on the markets during the week, siphoning investor enthusiasm from stocks just as third-quarter earnings season got underway. For the week, the Dow lost 1.21%, the S&P 500 fell 1.24% and the Nasdaq was down 0.44%.
Investors worried about inflation received good news today from the Labour Department, which said wholesale prices, as measured by the Producer Price Index, rose just 0.1% in September. While the PPI was up from the 0.1% decline in August, the figure was small enough to reassure Wall Street that inflation would not be a major problem for the foreseeable future.
“It’s nice to see a bit of a rebound today, but it’s not convincing in any manner,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “We’re not going anywhere meaningful until the price of oil comes down. It’s basically choking us.”
Consumers seemed to share that sentiment, as high gas prices have driven down cnfidence in the economy. The University of Michigan’s consumer sentiment index fell to 87.5 in October, down sharply from the 94.2 figure in September and far lower than Wall Street’s expectation of 94.
Tech shares were flat earlier in the session as Juniper Networks’s newly acquired NetScreen computer security division posted a drop in revenue, leaving investors wondering about the strength of computer networking and security companies. Juniper slid 1.27 to 23.76.
In other earnings news, financial company Wachovia reported a 14% rise in third-quarter earnings due to gains in its high-end investment and wealth management businesses. Wachovia, which beat Wall Street forecasts by a penny per share, climbed 1.16 to 48.45.
Sun Microsystems swung to a loss in its first quarter, with restructuring charges and a legal settlement wiping out the computer maker’s profits. The company lost 5 cents per share for the quarter, more than the 3 cents per share loss analysts expected. Sun Microsystems was unchanged at 3.97.
Advancing issues outnumbered decliners by nearly 5 to 2 on the New York Stock Exchange, where volume totalled 1.65 billion shares, compared with 1.49 billion at the same point on Thursday.
The Russell 2000 index of smaller companies was up 4.54, or 0.8%, at 569.42.