U.S. Stocks Rebound Strongly As Price Of Crude Falls

NEW YORK (MarketWatch) -- U.S. stocks on Thursday snapped strongly back after two days of losses, with the financial sector fronting the gains, as investors brushed aside negative economic data and focused on recent dips in commodities' prices.

"It's a reflection of a confused market. On some days, people want to celebrate the decline in oil prices, and on other days, there's concern crude is down because of slowing global growth," said Peter Boockvar, equity strategist at Miller Tabak. "Technology in particular is benefiting; buy technology and sell commodities."

After an opening slide, the Dow Jones Industrial Average reversed course, and was recently up 101.7 points to stand at 11,634.66, with 26 of its 30 components trading higher. Automaker General Motors Corp. was the leading gainer, up 10.4%.

"The CPI [consumer price index] number coming out prior to the open set the tone in that it was more negative than the market was expecting," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "That said, we've seen a decline in commodity prices, and crude is on a downward trend. It just helps the economy and helps the consumer."

The broader indexes also shifted course, with the S&P 500 gaining 9.33 to 1,295.16. Consumer discretionary and financials led the gains among the S&P's 10 industry groups, both up more than 3%.

In commodities trade, crude-oil futures were recently down, with the contract for September delivery off 85 cents at $115.15 a barrel on the New York Mercantile Exchange.

When crude declines, the financial and consumer discretionary sectors tend to benefit, said Fitzpatrick, who noted the trouble among financials does not involve issues of corporate red ink but of consumer debt.

Shares of Fannie Mae and Freddie Mac were both up about after a trade group said ease restrictions on the government-sponsored mortgage buyers. .

And, shares of mortgage insurer PMI Group Inc. gained 72.7% after it said it would sell its Australian businesses to raise cash. .

The Nasdaq Composite rose 25.04 points at 2,453.66.

Trading volume topped 644 million on the New York Stock Exchange, with advancers outpacing decliners almost 2 to 1. On the Nasdaq, 502 million shares were exchanged, with advancers running past decliners 8 to 5.

Bearish data

Ahead of the opening bell, U.S. stock index futures tossed aside gains when the Labor Department said consumer prices jumped 0.8% last month, while the core price index, which excludes food and energy costs, climbed 0.3%.

In a separate report, the Labor Department reported first-time claims for jobless benefits fell by 10,000 last week to 450,000, but the four-week average rose to six-plus-year highs. .

"It's nice to pay $3.85 a gallon instead of $4.15, but if you don't have a job, it doesn't really matter," said Boockvar.

Ahead of the economic data, stock futures had posted modest gains after Wal-Mart Stores Inc. reported a 17% rise in second-quarter profit. .

Shedding further light on the troubled housing industry, home foreclosures jumped 8% last month, with July possibly headed to go down as the worst month ever, according to data-tracking firm RealtyTrac. .

European shares also turned lower, with the pan-European Dow Jones Stoxx 600 index slipping 0.1% to 284.32. .

In Asia, the losing streak on the Shanghai Composite continued, with the Chinese index losing 0.4%.

U.S. stocks lost ground on Wednesday after a rebound in oil prices and a broker downgrade of leading banks.

By Kate Gibson