US market volatile after oil price surge

Wall Street ended a volatile session mixed today as investors welcomed new government data showing a reinvigorated industrial sector but wrestled with a jump in oil prices that briefly sent crude futures above US$67 (€55.63) per barrel.

Crude oil futures surged higher after the Energy Department reported a larger-than-expected drawdown in the nation’s crude oil reserves, although the report also showed a surprise surplus in gasoline inventories. A barrel of light crude was quoted at US$66.35 (€55), up US$1.28 (€1.06), on the New York Mercantile Exchange after reaching US$67.40 (€55.97).

The inventory report cost the market early gains that were spurred by the Commerce Department’s bullish report on durable goods, big-ticket manufactured items made to last at least three years. Durable goods orders shot up 3.3% in August after falling 5.3% in July. Economists had expected just minimal gains.

For analysts, the late session rally showed the market’s overall strength in the face of continuing uncertainty over energy prices, a slowdown in consumer spending and ever-higher interest rates.

“There are still some significant headwinds out there, but I have to say, the market has held up pretty well,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. “But ... we’re still stuck in the same trading range we’ve seen for months, and it’ll take better news to break out of it.”

The Dow Jones industrial average rose 16.88, or 0.16%, to 10,473.09.

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index added 1.23, or 0.1%, to 1,216.89, and the Nasdaq composite index lost 1.02, or 0.05%, to 2,115.40.

Bonds rallied, with the yield on the 10-year Treasury note falling to 4.26% from 4.29% late Tuesday. The dollar was mixed against other major currencies, while gold prices ticked higher.

While the market has been tracking closely to fluctuation in oil prices, the long-term effects of higher energy costs have yet to cycle through much of the economy, and could show up later in the year, the time when investors hope for their annual “Santa Claus” rally in November and December. If high gasoline and heating costs erode holiday spending, that rally could be in jeopardy.

“I look around, and I’m thinking, give me a rationale why I should own stocks right here,” said Jay Suskind, head trader at Ryan Beck & Co.

“Clearly you can pick stocks, pick sectors, find ways to make money. And the economy has shown amazing resiliency. But in the aggregate, that rationale is getting tougher to find.”

In corporate news, embattled auto maker General Motors Corp. rose seven cents to 30.84 after reaching a tentative contract deal with the Canadian Auto Workers and avoiding a strike just one hour before workers were to walk off the job.

DaimlerChrysler AG could said it will cut 8,500 jobs in its Mercedes division as the automaker works to restrain costs and return the Mercedes unit to profitability. DaimlerChrysler jumped 2 to 54.83.

Eastman Kodak Co. lost 12 cents to 24.89 after the company said its revenues from digital products would exceed expectations for the year, but that operating profit would come in below the company’s earlier targets due to a sluggish economy and high employee health care costs.

Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume came to 1.21 billion shares, compared with 1.12 billion traded at the same point on Tuesday.

The Russell 2000 index of smaller companies fell 3.13, or 0.47%, to 656.04. 282038.