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Stocks Climb as Oil Prices Drop in Light Trading

Dow hits a six-week high of 10,181.74 and broader indexes also rise. A drop in home sales helps pull down Treasury yields.

August 26, 2004|From Times Wire Services

Stocks rallied in quiet trading Wednesday as oil prices fell for a fourth straight session, sending the Dow Jones industrial average to a six-week high.

The moderate surge in buying was welcome on Wall Street, where investors have been in no hurry lately to commit new money to stocks. Many have stuck to the sidelines in the face of a long list of worries, including volatile oil prices and terror fears. Contributing to the session's light volume, a number of traders are preparing to take off ahead of the Republican National Convention in New York next week.

"All things being equal, if the price of oil continues to work its way lower, that will be very good for the market," said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. "It doesn't mean the market will go straight up, but hopefully we've put in a bottom and we can now work higher."

The Dow ended up 83.11 points, or 0.8%, at 10,181.74.

The broader gauges also posted gains. The Nasdaq composite index rose 23.83 points, or 1.3%, to 1,860.72. The Standard & Poor's 500 index finished up 8.77 points, or 0.8%, at 1,104.96.

Advancing shares outpaced decliners by 2 to 1 on the New York Stock Exchange.

Soaring fuel prices have pressured the market for weeks, with oil topping $49 a barrel last week, a record level. Prices have softened somewhat as anxiety about global supply eased, and a weekly government report showing higher-than-expected gasoline inventories sent them lower still Wednesday. Crude oil for October delivery dropped $1.74, or 3.9%, to $43.47 a barrel on the New York Mercantile Exchange. Gasoline futures tumbled 5%.

Investors were also pleased by a Commerce Department report that said orders for costly manufactured goods rose 1.7% in July, an encouraging sign that the economy was shaking off the summer doldrums. The reading for durable goods -- big-ticket items expected to last at least three years -- was the best in four months and boosted by demand for airplanes, machinery and communications equipment.

But the department found sales of new homes declined 6.4% in July, a far steeper drop than analysts had anticipated. The decline left home sales at their lowest level since December. Figures for June were also revised lower. Analysts said a challenging labor market and high fuel prices may be making people wary about purchasing a new home.

Bond traders saw the dip in home sales as a sign the economic slowdown would continue, helping to push Treasury yields lower. The yield on the benchmark 10-year note dropped to 4.26% from 4.28% on Tuesday.

In other market highlights:

* The housing report sent home builders lower. Centex fell 19 cents to $46.31 and KB Home lost 56 cents to $68.24. Toll Bros. shed 34 cents to $43.12 despite reporting a 56% surge in profit and raising its forecast for the year based on current demand and its backlog of orders for new luxury homes. Enthusiasm for Toll, which surged in early trading, waned on the news about sliding home sales.

* Boeing rose 3%, or $1.59, to $52.50 on news that Singapore Airlines had ordered as many as 31 long-range Boeing 777-300 jetliners.

* Gap, the largest U.S. clothing chain, slumped 41 cents to $19.52. Merrill Lynch & Co. analyst Mark Friedman cut his rating on the retailer to "neutral" from "buy" on concerns about sluggish demand in the coming months and a product shift that targets older customers rather than back-to-school sales.

* H&R Block slid $2.78, or 5%, to $48.45 for the day's second-steepest drop in the S&P 500. The company said it had a net loss of 26 cents a share for its fiscal first quarter ended July 31. It was expected to lose 5 cents, according to the average estimate of six analysts surveyed by Thomson First Call.

* Williams-Sonoma rose 10%, or $3.14, to $34.64 after reporting a 55% jump in profit in its fiscal second quarter ended Aug. 3 on strong sales at Pottery Barn and its outlet stores. The home-products retailer also raised its revenue estimates and reiterated its income guidance while elevating earnings, revenue and sales forecasts for the year.

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