Stocks Jump as Oil Retreats from High

Fri Aug 20, 2004
By Megan Davies

NEW YORK (Reuters) - U.S. stocks jumped higher on Friday, as investor worry about high fuel costs crimping consumer spending and hurting company profits eased after crude oil prices fell from their peak.

For the week, the blue-chip Dow posted its largest percentage rise in 15 months and the broader S&P 500 had its biggest in 10.

Chipmaker Marvell Technology Group Ltd. (MRVL.O: Quote, Profile, Research) boosted the Nasdaq after it posted a higher quarterly profit, helped by strong growth in enterprise and consumer markets.

But oil prices remained the focus as U.S. crude slid back from new highs on Friday. Dealers pocketed profits from a long record-breaking run, after escalating violence in Iraq took U.S. crude close to $50 a barrel.

NYMEX crude for September delivery (2CLU4: Quote, Profile, Research) ended below $48 a barrel, after hitting a fresh high of $49.40 early in the session.

Crude prices, driven by escalating violence in Iraq and unabated demand growth from China and India, have set records in 15 of the last 16 sessions. High oil prices have a downwards influence on most companies' profits and on consumer spending and investors are generally relieved when prices fall back.

"It's definitely encouraging that even though oil is around $47, it is off today. It's still expensive but the retreat is a benefit," said Brian Williamson, vice president, equity trading, The Boston Co. Asset Management,

"But it's in the face of very light volume, summer trading and the dog days of August, so any move in the stock market is going to be exaggerated.

The Dow Jones industrial average added 69.32 points, or 0.69 percent, at 10,110.14. The Standard & Poor's 500 Index was up 7.12 points, or 0.65 percent, at 1,098.35. The technology-laced Nasdaq Composite Index gained 18.12 points, or 1.00 percent, at 1,838.01.

For the week, the Dow rose 2.9 percent, the biggest rise since May 2003, while the S&P advanced 3.15 percent, the largest rise since October 2003. The Nasdaq rose 4.6 percent, the biggest gain since April 2004. The indexes are at their highest levels in two weeks.

Trading was moderate during Friday's session, with 1.2 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.3 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.

Advancers outnumbered decliners by about three to one on both the NYSE and the Nasdaq.
The rally may also have been helped by triple-witching, when August individual equity options and some options on stock indexes stop trading at Friday's close.

"There are two factors today. One is the drop in oil prices. Any time oil prices drop from now on -- for the next week or two -- I would assume that it's going to be a positive for stock prices," said Paul Cherney, chief market analyst at Standard & Poor's

"The other factor is that this is options expiration. I would imagine that a good portion of the price action that we saw today, besides buying because oil was dropping, was unwinding of hedges associated with the options expiration."

Technology stocks benefited from the improved mood. PC maker Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research) jumped 40 cents, or 2.3 percent, to $18.11, while wireless technology provider Qualcomm Inc. (QCOM.O: Quote, Profile, Research) gained $1.69 to $37.20, a 4.8 percent hike.

Google Inc. (GOOG.O: Quote, Profile, Research) shares, which jumped 18 percent in their long-awaited stock market debut on Thursday, continued to rise on Friday. Shares rose 8 percent, up $7.98 to $108.31.

Marvell was up $2.26, 10.4 percent, to $23.98.

Oil production companies Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) and ChevronTexaco Corp. (CVX.N: Quote, Profile, Research) edged higher, despite oil slipping back a bit.

Exxon rose 16 cents to $45.25, while ChevronTexaco gained $1.08, up 1.2 percent to $94.18.

Home Loans Articles, Mortgage Loans Articles, Financial News