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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Thursday, July 17, 2008 Stocks surge as falling energy prices bolster mood By Tim Paradis Associated Press NEW YORK -- Wall Street surged today, extending its rally into a second session as tumbling energy prices bolstered an already upbeat mood that followed stronger-than-expected quarterly reports from big names like JPMorgan Chase and United Technologies. The Dow Jones industrial average rose nearly 200 points. Investors got a double dose of good news after weeks of angst about the economy. Light, sweet crude fell $5.31 to settle at $129.29 a barrel; oil has dropped more than $15 in just the past three sessions. And early today three components of the Dow industrials -- JPMorgan Chase & Co., United Technologies Corp. and Coca-Cola Co. -- issued comments that generally indicated that their businesses are holding up despite sometimes difficult economic conditions. The reports let investors put aside some of their worst fears. Still, Wall Street has had some up periods in the past few months as optimism grew -- only to fall back into a downturn as worries about the financial sector and the economy have welled back up. "The sentiment has just been so negative that even a whiff of positive news is driving the markets," said Kevin Dorwin, principal at wealth management firm Bingham, Osborn & Scarborough in San Francisco. "Oil the key factor right now because inflation has been on the top of investors' minds and a reduction in the price of oil signals that perhaps inflation will not get out of hand. That's very positive for both the stock and bond markets." Beyond oil, natural gas prices also fell sharply today after the Energy Department said domestic stockpiles rose last week -- signaling a drop in demand. While levels remain below those of recent years natural gas fell 86.1 cents to settle at $10.537 per 1,000 cubic feet. A sustained drop in energy costs would be welcome news for nearly all parts of the economy. Consumers have been hard-pressed by higher fuel and food costs. Wall Street is worried they will pare their spending on discretionary items to make room in their budgets for the higher-priced necessities. A pullback could be troublesome as consumer spending accounts for more than two-thirds of U.S. economic activity.todayBut the pullbacks in energy and profit reports from marquee names left investors in an acquisitive mood. In the final minutes of trading, the Dow rose 194.03, or 1.73 percent, to 11,433.31. The Dow on Wednesday surged 276 points, or 2.5 percent, logging its best daily gain in three months after oil fell and Wells Fargo & Co. posted better-than-expected earnings. Broader stock indicators also rose today. The Standard & Poor's 500 index advanced 8.91, or 0.72 percent, to 1,254.27, and the Nasdaq composite index rose 21.30, or 0.93 percent, to 2,306.15. Advancing issues outpaced decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.58 billion shares. Bond prices showed steep declines as investors turned away from the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 4.04 percent from 3.94 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose. Wall Street also appeared placated by economic figures. A Commerce Department report showed construction of homes and apartments rose in June by 9.1 percent. The gain follows a change in New York laws that has given a boost to apartment building. Construction of single-family homes fell by 5.3 percent to the slowest pace in 17 years. Applications for building permits, one indicator of future activity, rose by 11.6 percent. The Labor Department reported that the number of newly laid-off people seeking unemployment benefits rose by 18,000 last week to 366,000. However, the increase was below the number economists expected. Investors appeared undeterred by a reading from the Philadelphia Federal Reserve showing another decrease in regional manufacturing. Corporate results helped buoy investor sentiment. JPMorgan Chase posted a 53 percent decline in its second-quarter earnings as mortgage and other loan defaults worsened, but the decline in profits wasn't as steep as Wall Street had feared and the stock rose $3.89, or 11 percent, to $39.83. "There were some better-than-expected numbers out of the banks. I think we're maybe getting a little bit of a sigh of relief rally. Things had gotten so scary there for a few days," said Denis Amato, chief investment officer at Ancora Advisors in Cleveland. Among other financials gaining, Fannie Mae and Freddie Mac jumped after Fitch Ratings affirmed long-term issuer default ratings on the government-chartered mortgage giants. Fitch cut Fannie's preferred stock rating and put Freddie's on watch for a possible downgrade. Investors have worried in recent weeks that they would run into serious financial troubles because of faltering mortgages. Fannie rose $1.72, or 19 percent, to $10.97, while Freddie rose $1.48, or 22 percent, to $8.31. United Technologies rose $3.80, or 6.2 percent, to $64.91 after posting an 11 percent increase in its second-quarter profit. The maker of everything from jet engines to ventilation systems reported strong growth at its Otis elevator and Carrier air conditioner divisions. The company also raised its full-year forecast for revenue and per-share earnings. Coca-Cola's second-quarter earnings fell 23 percent as the world's largest beverage company earned $1.42 billion. While the company's revenue and earnings excluding items topped expectations, analysts said volume growth was lighter than expected. The stock fell $1.96, or 3.7 percent, to $50.38. The Russell 2000 index of smaller companies rose 7.40, or 1.08 percent, to 694.15. Overseas, Japan's Nikkei stock average closed up 1.00 percent. Britain's FTSE 100 jumped 2.63 percent, Germany's DAX index rose 1.88 percent, and France's CAC-40 surged 2.76 percent. On the Net: New York Stock Exchange: http://www.nyse.com Nasdaq Stock Market: http://www.nasdaq.com

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