A sharp drop in oil prices gave Wall Street a modest relief rally today, with stocks edging higher on news that oil production had soared during the month of September.
Investors who have sold stocks for months as oil prices climbed reversed course Monday and started buying as the price of crude declined. While oil topped 55 per dollars barrel in pre-market trading, the latest production report from OPEC – showing crude production last month at 25-year highs – deflated futures trading substantially.
A barrel of crude closed at 53.67 dollars, down 1.26 dollars, on the New York Mercantile Exchange after reaching 55.33 dollars before the session.
“Oil’s precipitous slide lower and lower is giving investors a little more confidence in equities in an otherwise quiet afternoon,” said Brian Williamson, an equity trader at The Boston Company Asset Management. “I do think there could be some wait-and-see on earnings, since we have so many of them coming this week.”
The good news about oil helped investors overcome 3M Co.’s earnings, which missed Wall Street’s expectations as the company lowered its full-year outlook, blaming the volatile global economy for lower revenues. At least 30% of the Standard & Poor’s 500 companies are scheduled to report earnings this week, though another rise in oil prices could draw attention away from the reports.
The Dow Jones industrial average rose 22.94, or 0.23%, to 9,956.32.
Broader stock indicators were moderately higher. The Nasdaq composite index gained 25.02, or 1.31%, to 1,936.52, while the S&P 500 index was up 5.82, or 0.53%, at 1,114.02.
While the major indexes rose, advancing issues did not substantially outnumber decliners on either the New York Stock Exchange or the Nasdaq Stock Market, leading many analysts to wonder whether the rally could be carried through the coming days.
“The price of oil is so important to the market, and who knows what oil is going to do in the short term?” said Don Ross, chief investment officer at National City Investment Management Co. “I think we have some potential to break out to the upside by the end of the year, as long as we can stop oil from going up from here.”
Although 3M saw its earnings climb 17% in the third quarter, the industrial conglomerate missed Wall Street forecasts by a penny. Investors were further concerned as the company warned that its full-year results might also miss estimates. 3M tumbled 1.88 dollars to 76.10 dollars.
“3M is widely owned, but really isn’t a market leader or a proxy for the market the way it once was. Nobody’s making investing decisions based on 3M,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland.
Tech stocks rose as investors waxed optimistic on earnings from International Business Machines Corp., which reported earnings after the session. IBM, which beat Wall Street estimates by 3 cents per share before a one-time charge, closed at 85.82 dollars, up 1.07 dollars, and gained another 1.12 dollars to 87.04 dollars in after-hours trading.
Toy manufacturing rivals Mattel Inc. and Hasbro Inc. reported earnings early today, and both saw weakness in the third quarter. Mattel’s profits fell 5.2% in the quarter due to slow sales of its Barbie, Matchbox and Hot Wheels toys, though the company managed to beat earnings forecasts by a penny. Hasbro, meanwhile, took an accounting charge that caused the toy maker to miss earnings estimates by 6 cents per share. Mattel lost 47 cents to 17.50 dollars, while Hasbro shed 1.20 dollars to 17.26 dollars.
Dow component Pfizer Inc. gained 50 cents to 29 dollars after the pharmaceutical giant said it would conduct additional scientific studies on its Celebrex arthritis drug and potential cardiovascular risks.
Merck & Co. pulled its rival Vioxx drug from the market last month due to an increased risk of stroke and heart attack. Merck rose 40 cents to 30.90 dollars.
Advancing issues barely outnumbered decliners on the NYSE, where volume came to 1.37 billion shares, compared with 1.65 billion on Friday.
The Russell 2000 index of smaller companies was up 2.81, or 0.49%, to 572.23.