US stocks rocket on falling energy prices

Wall Street soared higher today, extending its rally into a second session as tumbling energy prices bolstered an already upbeat mood which followed stronger-than-expected quarterly reports from big names like JPMorgan Chase and United Technologies.

The Dow Jones industrial average rose more than 200 points, bringing its two-day advance to more than 480.

Investors got a double dose of good news after weeks of angst about the economy. Light, sweet crude fell 5.31 dollars to settle at 129.29 dollars a barrel; oil has dropped more than 15 dollars in just the past three sessions. And early today, three components of the Dow industrials – JPMorgan Chase & Co, United Technologies Corp and Coca-Cola Co – issued comments that generally indicated that their businesses are holding up despite sometimes difficult economic conditions.

The reports let investors put aside some of their worst fears about the economy. Still, Wall Street has had some up periods in the past few months as optimism grew – only to fall back into a downturn as worries about the financial sector and the economy have welled back up.

“The sentiment has just been so negative that even a whiff of positive news is driving the markets,” said Kevin Dorwin, principal at wealth management firm Bingham, Osborn & Scarborough in San Francisco.

“Oil the key factor right now because inflation has been on the top of investors’ minds and a reduction in the price of oil signals that perhaps inflation will not get out of hand. That’s very positive for both the stock and bond markets.”

Beyond oil, natural gas prices also fell sharply today after the Energy Department said domestic stockpiles rose last week – signalling a drop in demand. While levels remain below those of recent years natural gas fell 86.1 cents to settle at 10.537 dollars per 1,000 cubic feet.

A sustained drop in energy costs would be welcome news for nearly all parts of the economy. Consumers have been hard-pressed by higher fuel and food costs. Wall Street is worried they will pare their spending on discretionary items to make room in their budgets for the higher-priced necessities. A pullback could be troublesome as consumer spending accounts for more than two-thirds of US economic activity.

But the declines in energy and profit reports from marquee names left investors in an acquisitive mood again today.

The Dow rose 207.38, or 1.85%, to 11,446.66. Yesterday, the Dow surged 276 points after oil fell and Wells Fargo & Co posted better-than-expected earnings.

The 4.4% advance over two days was the Dow’s best two-day percentage gain since October 2002 and the point increase gave the blue chips their best back-to-back point gain since late November last year.

Broader stock indicators also rose today. The Standard & Poor’s 500 index advanced 14.96, or 1.20%, to 1,260.32, and the Nasdaq composite index rose 27.45, or 1.20%, to 2,312.30.

Advancing issues outpaced decliners by nearly 3 to 1 on the New York Stock Exchange, where volume came to 1.96 billion shares compared with 1.73 billion shares traded on Wednesday.

Bond prices showed steep declines as investors turned away from the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 4.01 percent from 3.94% late yesterday.

The dollar was mixed against other major currencies, while gold prices rose.

Wall Street also appeared placated by economic figures. A Commerce Department report showed construction of homes and apartments rose in June by 9.1%.

The gain follows a change in New York laws that has given a boost to apartment building.

Construction of single-family homes fell by 5.3% to the slowest pace in 17 years. Applications for building permits, one indicator of future activity, rose by 11.6%.

The Labor Department said the number of newly laid-off people seeking unemployment benefits rose by 18,000 last week to 366,000. However, the increase was below the number economists expected.

Corporate results helped buoy investor sentiment. JPMorgan Chase posted a 53% decline in its second-quarter earnings as mortgage and other loan defaults worsened, but the decline in profits was not as steep as Wall Street had feared and the stock rose 4.86 dollars, or 13.5%, to 40.80 dollars.

“There were some better-than-expected numbers out of the banks. I think we’re maybe getting a little bit of a sigh of relief rally. Things had gotten so scary there for a few days,” said Denis Amato, chief investment officer at Ancora Advisors in Cleveland.

Among other financials that gained, Fannie Mae and Freddie Mac jumped after Fitch Ratings affirmed long-term issuer default ratings on the government-chartered mortgage giants.

Fitch cut Fannie’s preferred stock rating and put Freddie’s on watch for a possible downgrade. Investors have worried in recent weeks that they would run into serious financial troubles because of faltering mortgages.

Fannie Mae rose 1.68 dollars, or 18%, to 10.93 dollars, while Freddie Mac rose 1.50 dollars, or 22%, to 8.33 dollars.

United Technologies rose 3.59 dollars, or 5.9%, to 64.70 dollars after posting an 11% increase in its second-quarter profit. The maker of everything from jet engines to ventilation systems reported strong growth at its Otis elevator and Carrier air conditioner divisions. The company also raised its full-year forecast for revenue and per-share earnings.

Coca-Cola’s second-quarter earnings fell 23% as the world’s largest beverage company earned 1.42 billion dollars. While the company’s revenue and earnings excluding items topped expectations, analysts said volume growth was lighter than expected. The stock fell 2 dollars, or 3.8%, to 50.34 dollars.

The Russell 2000 index of smaller companies rose 9.88, or 1.44%, to 696.63.