Stocks jump as oil prices fall sharply
NEW YORK -- Stocks rebounded today from a sell-off a day earlier as a sharp drop in oil prices eased worries over a quarterly loss from mortgage finance company Fannie Mae that was more than triple what Wall Street expected. The Dow Jones industrials rose nearly 200 points.
While investors welcomed the drop in oil, the news from the largest U.S. buyer and backer of home loans touched off fresh concern about the housing sector and the economy, though Fannie's troubles aren't a big surprise in a credit crisis that's now a year old.
A strengthening dollar helped lower the price of a barrel of oil. Light, sweet crude fell $3.93 to $116.09 on the New York Mercantile Exchange. Investors are eager to see any easing of inflation pressures and have cheered a pullback of about $30 a barrel from its mid-July high.
Wall Street appeared unfazed by the Labor Department's report showing that U.S. workers' efficiency grew at a slightly slower pace in the second quarter as companies sought to produce more with smaller work forces. But gains in wages and benefits also slowed; keeping compensation in check can help contain inflation.
Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis, said that while the strength in the dollar and the resulting drop in oil were attracting buyers Friday, Wall Street's recent back-and-forth trading illustrates the nervousness of investors.
"We live in a market where people react, they don't anticipate," he said. "So you've got this market that's kind on a seesaw every day reacting to news."
In late afternoon trading, the Dow rose 193.21, or 1.69 percent, to 11,624.64. The blue chips fell nearly 225 points Thursday after concerns about the financial sector, a weak showing by retailers in July and a spike in weekly unemployment claims. The decline erased most of the 370-point gain the Dow had logged over the prior two sessions.
Broader indicators also rose Friday. The Standard & Poor's 500 index rose 17.29, or 1.37 percent, to 1,283.36, and the Nasdaq composite index advanced 38.42, or 1.63 percent, to 2,394.15.
Bonds fell as stocks jumped, easing demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, rose to 3.94 percent from 3.93 percent late Thursday. Gold prices fell.
