Stocks rose Tuesday as minutes from the latest Federal Reserve meeting helped to cement investors' view that the Fed won't need to raise interest rates again anytime soon and crude oil prices dropped below $70 a barrel.
Stocks opened lower and extended declines early in the session after the Conference Board's consumer confidence index slid to a nine-month low, reigniting worries about slower economic growth.
But later Tuesday, the minutes of the Fed's Aug. 8 policy-setting meeting showed officials favored keeping interest rates steady and gathering more data before deciding on any future rate increases.
The Dow Jones industrial average gained 17.93 points, or 0.16%, to 11,369.94. The Standard & Poor's 500 index added 2.50 points, or 0.19%, to finish at 1,304.28. The Nasdaq composite index climbed 11.60 points, or 0.54%, to close at 2,172.30.
Oil's fall below $70 was "a positive backdrop," said Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco. News of lower energy costs served as a catalyst for gains on a day when volume was light, ahead of the last holiday weekend of the summer, he said.
"Technically speaking, it's a continuation of a near-term uptrend," said Chris Burba, a short-term market technician at Standard & Poor's. Closing near session highs means "odds would favor more follow-through buying tomorrow."
Treasury bond yields fell to five-month lows after the minutes of the Federal Open Market Committee meeting came out less hawkish than some had expected. The 10-year T-note closed at 4.78%, down from 4.79% Monday.
Bond yields fall as their prices rise. Earlier in the day, bond prices weakened ahead of the Treasury Department's sale of $22 billion of two-year notes.
After the auction, dealers said there was some concern over weakness in the indirect bids component, which is seen as a proxy for foreign central bank demand.
Foreign central banks have been major buyers of Treasuries in recent years and any sign that they are leaving the market is a cause of concern for traders.
But the overall appetite for the two-year notes looked fairly healthy. The notes were sold at a yield of 4.92%, and the yield on the existing two-year notes fell to 4.85% after the Fed minutes.
The Conference Board's consumer confidence index was another piece of evidence that raised concern spending may wane. Americans rattled by rising gasoline prices and a slowing housing market pushed the gauge to 99.6 in August, the biggest drop since September. Economists in a Bloomberg News survey had forecast a decline to 102.7.
But stocks were helped the last two sessions by a drop in energy prices, as Tropical Storm Ernesto appeared likely to hit Florida instead of oil and gas platforms in the Gulf of Mexico. Crude oil futures fell 90 cents to $69.71 in New York trading.
However, the drop in crude prices caused major oil companies to lose ground on the possibility of a revenue dip. Exxon Mobil fell 69 cents to $69.41. Chevron gave up 42 cents to $65.74 and BP dropped $1 to $67.30.
Consumer-oriented stocks, such as those of retailers, and transportation companies again posted gains. Both sectors typically rally when fuel prices wane, an indicator that consumers might have more money to spend.
The session was marked by continued slow summer volume, which is expected to persist until after Labor Day, and little corporate news. German drug maker Bayer shed 11 cents to $50.48 after it announced a restructuring plan for its CropScience unit that will lead to 1,500 job cuts.
In other market highlights:
* Goldman Sachs Group, Morgan Stanley and Bear Stearns declined after their third-quarter earnings estimates were cut by a Sanford C. Bernstein analyst, who cited a slowdown in investment banking and stock and mortgage trading.
Goldman slipped $2.44 to $147.09. Morgan Stanley slumped $1.25 to $65.64 and Bear Stearns dropped $4.05 to $129.85.
A Punk Ziegel analyst cut his rating on those firms as well as Merrill Lynch and Lehman Bros. Holdings. Merrill dropped $1.29 to $72.85 and Lehman slid $1.94 to $62.48.
* Intel rose 30 cents, or 1.6%, to $19.68 for the Dow average's biggest advance. The company introduced the Xeon chip ahead of schedule to combat market-share losses to Advanced Micro Devices, its closest competitor. AMD shares added 48 cents to $24.40.
Semiconductor companies in the S&P 500 added 1.8% for the biggest advance among two dozen industry groups.
* Positive results from home furnishings retailer Restoration Hardware late Monday sent the company's shares up $1.04, or 17%, to $7.18.
* Boeing declined 94 cents to $73.78, a day after the aircraft manufacturer said it would repurchase as much as $3 billion of its own stock.