US stocks regroup

Stocks managed to squeeze out modest gains in a volatile session Monday as crude oil futures, which briefly topped $US58 per barrel in early trading, settled lower.

A rare piece of good news for embattled Dow Jones industrial American International Grdow oup helped blue chips make gains.

Oil prices again kept investors on edge after reaching a new intraday high of US$58.28 (€45.36) early in the morning. After fluctuating throughout the session, oil futures settled at US$57.01 (€44.37), down 26 cents, on the New York Mercantile Exchange.

Yet oil remained a source of concern for investors, who fear that crude prices in the high US$50 range could eat into consumer spending, prompting either an economic slowdown or rising prices that could trigger inflation. And there was no real sign that oil would decline substantially.

“It’s hard to say where that line in the sand is, that level for oil prices where the market will seriously sell off,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “I do think that if you have sustained levels of US$60 (€46.70)to US$65 (€50.59), then the market will be very hard pressed to make any move to the upside.”

The Dow Jones industrial average rose 16.84, or 0.16%, to 10,421.14.

Broader stock indicators also moved modestly higher. The Standard & Poor’s 500 index was up 3.20, or 0.27%, at 1,176.12, and the Nasdaq composite index gained 6.26, or 0.32%, to 1,991.07.

Bonds edged lower as oil prices fluctuated, with the yield on the 10-year Treasury rose to 4.46% from 4.45% late Friday. The dollar was mixed against other major currencies, while gold prices fell.

AIG gained 2.35 to 53.30 after New York Attorney General Eliot Spitzer said a civil resolution with AIG would be achievable, and that the company was fully co-operating with his investigation of the company’s accounting and business practices.

The concerns about higher oil prices drew attention away from ChevronTexaco Corp.’s US$16.4bn (€12.77bn) acquisition of oil explorer Unocal Corp., the reported sale of Morgan Stanley’s Discover Card division and the possibility of a renewed bidding war for MCI Inc.

“No matter what else may be going on, when you have oil topping US$58 (€45.15) per barrel, the market’s main focus is going to be inflation related,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co.

“I don’t see this market collapsing, but it’s going to be like this for a while until we see oil stabilise and we get clarity on interest rates.”

Unocal tumbled 7.4%, or 4.75, to 59.60, due to the relatively low valuation; ChevronTexaco lost 3.9%, or 2.33, to 56.98.

Morgan Stanley climbed 1.43 to 58.30, after a media report said the company’s board had approved the sale of its Discover Card credit division.

Dow Jones Newswires, citing an unidentified source, reported the board had authorised the divestiture, which is expected to net between US$8bn (€6.23bn) and US$9bn (€7bn). A Morgan Stanley spokeswoman called the report a “market rumour.”

MCI Inc. slumped 21 cents to 25.08 after it said it will reopen talks with Qwest Communications International Inc., despite having agreed to a US$7.6bn (€5.92bn) takeover bid by Verizon Communications Inc. Qwest, which sweetened its offer to nearly US$9bn, added 18 cents to 3.82, while Verizon was up 46 cents at 35.65.

General Motors Corp. lost 33 cents to 29.05 after the company said Chairman and CEO Rick Wagoner would take direct control over daily responsibility for the automaker’s struggling North America division.

Advancing issues outnumbered decliners by nearly 5 to 4 on the New York Stock Exchange, where volume was heavy.

The Russell 2000 index of smaller companies was up 2.21, or 0.36%, at 613.76.