Stocks rebound as oil prices fall
An afternoon rally spurred by a drop in oil prices pushed stocks higher Monday, bringing investors back into the market despite lingering concerns over the strength of the dollar and the nation’s trade deficit.
Trading opened lower on fears that the economy could slow down further, spurred by Federal Reserve Chairman Alan Greenspan’s warnings Friday that the U.S. budget deficit and trade deficit were causing undue pressure on the U.S. dollar and the economy. Those concerns weighed heavily on Wall Street Friday, prompting a 115-point drop in the Dow Jones Industrials.
Yet investors were cheered Monday afternoon as oil prices fell slightly, and used the dip as an excuse to continue buying stocks, analysts said. A barrel of light crude settled at $48.64, down 25 cents, on the New York Mercantile Exchange.
“I think this is a market that really wants to go up,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “Yes, we’re worried about the dollar, but it was down for weeks and nobody paid attention until Greenspan said something. There’s still enough out there to remain positive about, and I think we’ll come out of this week and move higher through December.”
The Dow rose 32.51, or 0.31 percent, to 10,489.42.
Broader stock indicators closed substantially higher. The Standard & Poor’s 500 index was up 6.90, or 0.59 percent, at 1,177.24, and the Nasdaq composite index gained 14.56, or 0.7 percent, to 2,085.19.
Prompted by Greenspan’s comments last week, investors worried that a free-falling dollar, which has been regularly setting record lows in recent weeks, could harm the inflow of foreign investment into U.S. stocks and bonds. The dollar was little changed against the euro and the Japanese yen, remaining near its historic lows.
“There’s a lot of macroeconomic issues around that aren’t going to be easily resolved, and that has investors’ attention,” said Jay Suskind, head trader at Ryan Beck & Co. “It’s not really a sense of uneasiness, but more that there are some headwinds out there to continued growth.”
However, Thanksgiving week has traditionally been a strong time for stocks, despite light volume, and analysts noted that many mutual funds end their fiscal years on Nov. 30 — prompting many money managers to buy up stocks in the hopes of bolstering their yearly returns.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where preliminary consolidated volume came to 1.76 billion shares, compared to 1.92 billion on Friday.
The Russell 2000 index of smaller companies was up 8.08, or 1.32 percent, at 621.52.
Overseas, Japan’s Nikkei stock average tumbled 2.11 percent. In Europe, Britain’s FTSE 100 closed down 0.58 percent, France’s CAC-40 dropped 0.65 percent for the session and Germany’s DAX index fell 0.26 percent.