Falling oil prices maintain Wall Street rally

Stocks rose sharply on the New York Stock Exchange today, extending their rally for a second session as investors expressed relief over plummeting oil prices following a government report that showed a build in crude inventories.

The Dow Jones industrial average registered its second straight triple-digit gain, pushing back above the 10,000 mark.

Investors welcomed the government’s weekly supply report, although it showed a slide in distillate products. Nonetheless, the resulting plunge in crude futures helped equities bounce back from a lacklustre opening. The question for stock investors, however, is whether oil prices will continue to fall.

“The move in crude doesn’t seem to be much on the surface other than pulling back to the lower end of a range on the way up,” said Todd Clark, head of listed equity trading at Wells Fargo Securities.

“If it were to prove to be a true break, then certainly it’s a much better backdrop for equities. I don’t know if that’s the case, but two strong back-to-back days on the market suggest two things: One, people are under-invested in equities and, two, a lot of people are short the market.”

Wall Street has grown increasingly anxious about how soaring energy costs might dent consumer spending ahead of what’s expected to be a chillier than normal winter.

With oil prices hovering near the 55-per-barrel level for several days, OPEC urged the Bush administration to release more oil from the US strategic reserve to calm the market. But, after the release of the inventory data, light, sweet crude for December delivery skidded 2.71 to 52.46 on the New York Mercantile Exchange.

The Dow shot up 113.55, or 1.15%, to 10,002.03, following a 138-point rise on Tuesday. It was the first time since May 9 and May 12, 2003, that the blue chips have gained more than 100 points in two consecutive sessions. The index also rose above 10,000 for the first time in two weeks.

The broader gauges were also higher. The Standard & Poor’s 500 index rose 14.31, or 1.29%, to 1,125.40. The Nasdaq composite index surged 41.20, or 2.14%, to 1,969.99.

A jump in orders for big-ticket items offered further encouragement. The Commerce Department said orders to US factories for durable goods – items expected to last three or more years – rose 0.2 percent in September, propelled by higher demand for communications equipment. That followed a decline of 0.6% in August.

Excluding the volatile transportation sector, orders were up 1.7% last month following a 2.8% increase in August.

Analysts welcomed the two-day pop in share prices, saying it was partly the product of oversold conditions. Anxiety over lofty oil prices, rising interest rates, decelerating corporate earnings and fear that the upcoming presidential race could be targeted by terrorists, or might not result in a clear winner, have weighed heavily on the markets in recent weeks.

“It’s nice to see some more volume coming back into the market, which indicates people are willing to make some commitments and look past some of the shorter-term issues we see, including in earnings and guidance,” said Jack Caffrey, equity strategist for JP Morgan’s private bank.

”Earnings have been OK this quarter, a little better than expected, but not quite as much better as we’d gotten used to. The (year-over-year) comparisons are getting tougher… and you’re seeing a larger percentage of companies missing expectations.”

Among Dow components reporting results, Boeing Co. was up after the aerospace giant beat Wall Street expectations with a 78% jump in third-quarter earnings, buoyed by strong defence business. It also raised its estimate for full-year profits, citing lower-than-anticipated tax expenses.

Advancing issues outnumbered decliners by more than two to one on the New York Stock Exchange. Volume came to 1.72 bllion shares, compared to 1.69 billion shares traded on Tuesday.

The Russell 2000 index, which tracks smaller company stocks, was up 9.57, or 1.66%, at 587.18.