Sep 17, 2004 4 min read

By Meg Richards AP Business Writer

NEW YORK (AP) – Stocks regained some momentum Thursday as fresh economic data suggested inflation remains well under control, but volatile oil prices gave investors some pause late in the session.

Analysts are closely watching stocks for signs that the market will stabilize in the second half of the year, but choppy trading has made it difficult to build confidence among investors, particularly given recent fluctuations in oil prices. Some traders questioned the durability of the day’s advance following a series of lowered corporate forecasts and mixed economic data.

“Once again, we’ve pulled oil into the headlines. It seems we always find ourselves with that staring us down anytime we’re starting a rally,” said Bill Groenveld, head trader for vFinance Investments. “We’ve had a strong move, but it would be healthy for the market to consolidate. It could give us a pedestal to move higher, solidly, in the fourth quarter, as long as economic numbers don’t change and oil stays in line.”

According to preliminary calculations, the Dow Jones industrial average finished up 13.13, or 0.1 percent, at 10,244.49.

The broader gauges also closed in positive range. The Nasdaq composite index added 7.56, or 0.4 percent, to 1,904.08. The Standard & Poor’s 500 index gained 3.13, or 0.3 percent, to 1,123.50.

Oil production facilities in the Gulf of Mexico were restaffing after a lashing by Hurricane Ivan that threatened rigs, tossed tankers off course and cut daily production by half. Crude prices were down most of the day, but inched higher late in the session as traders covered their shorts. Light crude for October delivery was up 30 cents at $43.88 per barrel on the New York Mercantile Exchange.

The Labor Department reported a 0.1 percent increase in the Consumer Price Index, the government’s most closely watched inflation gauge. It was a better reading than the 0.2 percent rise forecast by economists, and indicates inflation poses no immediate risk. Analysts said the economic lull in late spring and early summer made it harder for some companies to raise prices.

Following a weaker session Tuesday, which analysts said was overdue after four weeks of solid gains, the inflation data served as a buying incentive for investors, and more than offset negative earnings warnings from several companies, including Nortel Networks Corp. Volume was light due to Rosh Hashanah – the Jewish New Year – and ahead of the usually volatile “triple witching” on Friday, when options and futures contracts expire.

Much attention has been focused on economic data ahead of next week’s meeting of the Federal Reserve, when policy-makers are expected to raise the federal funds rate by a quarter point to 1.75 percent. As long as inflation remains in check, analysts say the Fed is unlikely to adopt a more aggressive policy on rates. Investors also remained preoccupied with what lies ahead for stocks in the second half, though analysts say they should keep their expectations in check.

“Now through the end of the year there might be some anxiety, but this is the time to really get back to business and make your money in the market,” said David Hegarty, head trader at Commerzbank Securities. “We have four more months here, so this is where the action happens. I’m confident in the market going through the end of the year. I don’t think we’ll put in spectacular gains, but I think the market could go another 2 percent higher.”

Nortel shed 7.9 percent, or 30 cents, to $3.50, after the Canadian telecom equipment giant warned that revenue for the current quarter would be lower than the previous period, and full-year growth was likely to trail the industry. Regulators are investigating the company for possible accounting fraud.

Delta Air Lines Inc. was down 9 cents at $4.01, after an independent auditor raised doubts about the carrier’s financial viability, and the company revised its annual report to include the possibility of a Chapter 11 bankruptcy filing.

Joining the list of tech concerns that have issued earnings warnings, Lawson Software Inc. shed 13 percent, or 77 cents, to $5.36, after announcing that it expects lower-than-predicted results for the latest quarter due to an unexpected drop in tech spending.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange. Volume came to 1.11 billion shares, compared to 1.25 billion traded Wednesday.

The Russell 2000 index, which tracks smaller company stocks, was up 6.02, or 1.1 percent, at 574.54.

Overseas, Japan’s Nikkei stock average finished 0.2 percent lower Thursday. In Europe, France’s CAC-40 was unchanged, Britain’s FTSE 100 added 0.2 percent and Germany’s DAX index was up 0.6 percent.

___

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

AP-ES-09-16-04 1627EDT