Lower Oil Prices, Upbeat Job Data Help Lift Stocks

Investors cheered by falling oil prices and an improving job picture sent stocks higher Tuesday, hoping the news signals a renewal of economic strength and a fall rally in stocks.

Oil prices dropped below the $43-per-barrel mark before rising slightly to end the session, giving credence to investors’ belief that the summer’s run on oil prices was at an end. A barrel of light crude settled at $43.31, down 68 cents, on the New York Mercantile Exchange.

Wall Street also moved higher on Friday’s job report, which was given short shrift in last week’s very light trading and was overshadowed by Intel’s disappointing midquarter report. The Labor Department reported a 0.1 percentage point drop in the unemployment rate and the creation of 144,000 new jobs.

“The market is rallying on the jobs report and the fact that the price of oil is heading lower,” said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. “If we break $40 a barrel on oil and keep the jobs coming, we could see a substantial rally in stock prices this month.”

The Dow Jones industrial average rose 82.59 points, or 0.8%, to 10,342.79, its highest close since June 30.

Broader stock indicators rose moderately. The Standard & Poor’s 500 index was up 7.67 points, or 0.7%, at 1,121.30, and the Nasdaq composite index gained 14.08, or 0.8%, to 1,858.56.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange.

Although volume on the major markets rose substantially after last week’s record lows, many investors remained on the sidelines, awaiting Federal Reserve Chairman Alan Greenspan’s testimony before Congress today, where he was expected to give his view on the strength of the economic recovery.

“I think Greenspan will stick to his mantra of a measured pace of interest rate hikes,” said John Lynch, chief market analyst at Evergreen Investments. “We’re transitioning from the spectacular growth of the past year to more boring, but still important, growth, and the interest rate policy has to reflect that.”

Investors seemed to discount the effect that the summer’s skyrocketing oil prices would have on third-quarter earnings, even as the usual round of warnings and preannouncements begin in earnest this week. Analysts said that while oil would be a factor, along with more difficult year-over-year comparisons, earnings overall should remain positive, with double-digit earnings growth expected.

A serious rally, however, may be postponed until after the presidential elections, or at least until a clear front-runner is established, Lynch said. “As we all know, the market hates uncertainty, and the election situation is still too uncertain for anybody to make a bet right now.”

In other markets highlights Tuesday:

* Treasury yields dropped, with the benchmark 10-year note falling to 4.24%, from 4.28% on Friday. Yields fall as Treasury prices rise, but some traders said much of the session’s move was technical in nature and that the market was awaiting today’s comments by Greenspan for a better sense of direction.

* An index of companies that makes cars and parts advanced 1.6%, for the biggest jump among the S&P; 500’s 24 industry groups. General Motors rose 61 cents to $43.14, and Ford gained 35 cents to $14.56. Delphi, the world’s largest maker of automotive parts, added 24 cents to $9.49.

* Homebuilders gained, with Hovnanian Enterprises surging $3.27, or 9.3%, to $38.50, after saying it expects fiscal 2004 earnings to top $5.30 a share, up from a June forecast for profit of more than $5.

Pulte Homes, the biggest U.S. homebuilder by stock market value, added $2.90 to $62.76. Centex, the fourth-largest, advanced $1.78 to $48.78, and Los Angeles-based KB Home rose $3.56 to $74.33.

* Pressure on semiconductors grew more intense as Lehman Bros. cut its ratings on Intel and National Semiconductor to “equal weight” from “overweight,” citing low demand for computer chips. Intel dropped 16 cents to $19.89, while National Semiconductor slipped 75 cents to $12.42.

* International Game Technology jumped $1.84, or 6.1%, to $31.89, for the second-largest gain in the S&P; 500. Shares of the biggest maker of slot machines may rise 20% to 40% in 18 months to 24 months as new casinos drive earnings growth, Barron’s said. The company’s installed base of machines will increase 6% a year for the next five years, Chief Executive Thomas Matthews said.