Wall Street ended modestly higher Thursday, edging up from seven-week lows, as oil prices stalled below $68 a barrel and as long-term bond yields continued to ease.
In thin trading, the Dow Jones industrial average added 15.76 points, or 0.2%, to 10,450.63, and most broader indexes also posted slight gains. Winners topped losers by 7 to 5 on the New York Stock Exchange.
Some investors stepped back into the market after recent declines that had clipped 2.5% off the Dow from its summer high of 10,705.55 reached on July 28.
"Our view on oil prices is that although they have spiked and they are beginning to be a drag on the economy, they are still not at crisis levels," said Ben Halliburton, who oversees $400 million as chief investment officer at Tradition Capital Management in Summit, N.J. He expects the Standard & Poor's 500 index to rise as much as 10% by year-end.
Crude oil futures in New York ended at a new high Thursday, gaining 17 cents to $67.49 a barrel. But the price pulled back after reaching $68 during trading.
Oil has soared 19% since July 20 amid mounting concerns about tight global supplies. The latest jump in prices has been triggered in part by worries that Tropical Storm Katrina, which was moving toward the Gulf of Mexico, might disrupt oil and natural gas production there.
Those concerns appeared to moderate Thursday. Still, oil prices "will remain strong as long as there is even a slight chance that the storm will affect production in the Gulf," said Jim Steel, director of commodity research at Refco Inc.
Drilling platforms in the Gulf of Mexico account for 24% of U.S. natural gas production and 30% of oil output.
The stock market had been rallying strongly since late April on optimism about the economy and corporate earnings. But the continuing surge in energy prices has damped investors' mood in recent weeks.
"Oil prices at these levels are providing all kinds of dislocation issues for stocks," said Joseph Battipaglia, chief investment officer at brokerage Ryan Beck & Co. "Earnings and the economic data are OK, but with oil where it is, the market is unable to make a decision, long or short, and there's certainly no real catalyst for buying."
Neither has the selling been pronounced, however. The S&P 500 index, which rose 2.78 points, or 0.2%, to 1,212.37 on Thursday, is off 2.6% from the four-year high it reached Aug. 3.
The Nasdaq composite index, up 5.46 points, or 0.3%, to 2,134.37 Thursday, is down 3.8% from its four-year high reached Aug. 2.
Declining long-term bond yields may be providing some support for stocks. The bellwether 10-year Treasury note yield ended at 4.16% Thursday, down from 4.17% on Wednesday and the lowest since July 20. The yield has fallen from 4.42% on Aug. 8.
But bond buyers appear to be betting on a weaker economy, something that could upset equity investors if it comes to pass, analysts said.
"There're a lot of people out there worried oil prices are going to slow the economy," said William Hornbarger, chief bond strategist at brokerage A.G. Edwards & Sons Inc.
Certain stock sectors, including retailers, have fallen more sharply than major indexes in recent weeks on fears that consumer spending could be sapped by record gasoline prices.
Some analysts say that, with many market players on vacation until after Labor Day, stocks and bonds overall are more likely to drift than make any sharp moves.
Among Thursday's market highlights:
* Pet-store chain PetSmart slumped $3.86 to $24.65 after warning that earnings in the current quarter would fall short of expectations. The company said it was "cautious" on its outlook for the economy for the rest of the year.
Rival Petco, which also warned of weaker near-term results, fell to $23.32 in after-hours trading after losing 70 cents to $25.55 in regular trading.
* Some restaurant chains continued to slide on jitters over consumer spending. P.F. Chang's China Bistro fell $1.46 to $52.01 and Landry's dropped $1.10 to $29.87. Applebee's International, which slid $1.68 to $22.37 on Wednesday after trimming its 2005 earnings forecast, inched up 13 cents to $22.50.
* Also in the restaurant sector, Dave & Buster's plunged $3.01 to $15.65. The company cut its profit forecast for the year, citing costs associated with its acquisition of the Jillian's eatery chain.
* Gambling stocks provided some excitement. Harrah's Entertainment jumped $2.96 to $73.37, MGM Mirage was up $1.41 to $43.42, Wynn Resorts rose $1.18 to $48.56 and Las Vegas Sands added 69 cents to $35.92.
* Martha Stewart Living Omnimedia surged $3.12 to $29.19. Some analysts cited optimism that Martha Stewart's new TV show, which will begin airing Sept. 12, could boost the company's fortunes.
* Among Southland issues, insurance firm Mercury General gained $2.70 to $58.40. Standard & Poor's said it would add the stock to the S&P 400 index of mid-size shares.
* The Dow utility stock index rose 4.67 points, or 1.2%, to 402.11, nearing the four-year closing high of 405.27 reached on Aug. 3. TXU rallied $1.74 to $96.92 and Public Service Enterprise rose $1.04 to $62.75.