Stocks post a slight gain as oil falls
By Michael J. Martinez AP Business Writer
NEW YORK (AP) – Another sharp drop in oil prices helped Wall Street overcome profit-taking and extend its rally to a third straight session Thursday. The major indexes posted modest gains in a heavily-traded session.
Concern over China’s decision to raise its benchmark interest rate for the first time in nine years pressured materials and energy stocks, as investors worried about slower demand from the world’s fastest-growing economy. However, the move also encouraged selling in oil.
Oil prices dropped past $51 per barrel, continuing Wednesday’s sharp retreat and coaxing stock buyers back into the market in afternoon trading. A barrel of light crude closed at $50.92, down $1.54, on the New York Mercantile Exchange, the lowest close for oil futures since Oct. 4’s price of $49.91 a barrel.
“Certainly, there’s still a good amount of risk appetite in the market,” said Chris Wolfe, global head of equities for J.P. Morgan Private Bank. “You’re seeing people come back in despite the pressures, and as far as earnings go, so far so good.”
After profit-taking kept the major indexes down through the morning, the Dow Jones industrial average rose 2.51, or 0.03 percent, to 10,004.54, according to preliminary calculations. In the previous two sessions, the Dow had its first back-to-back triple-digit gains since May 2003.
Broader stock indicators were modestly higher. The Standard & Poor’s 500 index was up 2.04, or 0.18 percent, at 1,127.44, and the Nasdaq composite index gained 5.75, or 0.29 percent, to 1,975.74.
The major indexes posted their first three-day stretch of gains since Sept. 10-14.
Unemployment questions weighed on some investors, as the Labor Department reported a sharp uptick in first-time jobless claims last week. The number of Americans filing for unemployment for the first time rose to 350,000, up 20,000 from last week – the largest jump in a month.
In one of the more notable initial public offerings of the year, DreamWorks Animation SKG Inc. – the studio responsible for the “Shrek” franchise – jumped $10.75 from its $28 offering price to close at $38.75 per share.
Companies reporting earnings got a mixed reception Thursday, despite generally good numbers, as investors looked more at fourth-quarter forecasts than current results.
“I think companies’ earnings have been overlooked,” said Som Dasgupta, managing director of trading at PNC Bank in Pittsburgh. “Most of the S&P 500 has exceeded or met expectations. Valuations right now can be seen as pretty compelling.”
Having enjoyed the sharp climb in oil prices through the third quarter, Dow component ExxonMobil Corp. posted record profits for the third quarter, beating analysts’ increased forecasts by a penny per share. ExxonMobil, which said it was poised to break its records for full-year revenues and profits, nonetheless lost 34 cents to $48.61.
Verizon Communications Inc. slipped 2 cents to $39.38 after it too beat estimates by a penny per share. While profits were flat for the third quarter compared to a year ago, the Dow component’s wireless division turned in a strong performance, adding 1.7 million new customers.
Aetna Inc. reported a nearly 500 percent increase in third-quarter profits, crediting higher membership and a one-time tax credit for the gains, which beat Wall Street estimates by 11 cents per share. The company also brightened its outlook for future profits. Aetna surged $3.55 to $95.30.
Although Viacom Inc. swung to a loss in the third quarter due to a $1.5 billion charge for the spinoff of its Blockbuster video rental chain, the company’s operating earnings still surpassed Wall Street expectations by a penny per share. Viacom gained $1.15 to $36.50.
Defense company Raytheon Co. was up 79 cents at $37.45 after it swung to a profit on a 13 percent increase in revenues. The company beat analysts’ forecasts by 4 cents per share.
Alcoa Inc. was one of the hardest hit stocks as investors worried about demand for metals in China due to its interest rate hike. The Dow component sank 96 cents to $32.41.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume was heavy.
The Russell 2000 index of smaller companies was down 1.56, or 0.3 percent, at 585.62.
Overseas, Japan’s Nikkei stock average rose 1.51 percent. In Europe, Britain’s FTSE 100 closed down 0.27 percent, France’s CAC-40 climbed 1.18 percent for the session, and Germany’s DAX index gained 0.78 percent in late trading.
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AP-ES-10-28-04 1633EDT