Stocks Rally As Oil Continues To Drop

Dow Jones Climbs 200 Points, Surpassing Initial Expectations For Market Boost

(CBS/ AP)  Wall Street shot higher Thursday, 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 more than 200 points, bringing their two-day advance to more than 480.

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 Thursday, 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 about the economy. 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 Thursday 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.

Last week, American drivers pumped 5 percent less gas than they did a year ago, marking 12 straight weeks of declining demand, reports CBS News business correspondent Anthony Mason.

"People are reacting to the high prices," oil trader Ray Carbone told CBS News. "They're just not using the gasoline and that has been causing prices to drop."

At $4.11 a gallon, gas is still at record highs, but that may not last if traders sense the economic slowdown in the U.S. and Europe is spreading to the countries where the appetite for oil is exploding, reports Mason.

"If it seeps into emerging markets, namely China, India and the Middle East, then we're going to see a bigger collapse in demand and we'll see lower prices for sure," said Carbone.

The declines in energy and profit reports from marquee names left investors in an acquisitive mood again Thursday. According to preliminary calculations, the Dow rose 207.38, or 1.85 percent, to 11,446.66. The Dow on Wednesday surged 276 points after oil fell and Wells Fargo & Co. posted better-than-expected earnings.

The 4.4 percent advance over two days was the Dow's best two-day percentage gain since October 2002 and the point increase gave the blue chips their best back-to-back point gain since late November last year.

Broader stock indicators also rose Thursday. The Standard & Poor's 500 index advanced 14.96, or 1.20 percent, to 1,260.32, and the Nasdaq composite index rose 27.45, or 1.20 percent, to 2,312.30.

Advancing issues outpaced decliners by nearly 3 to 1 on the New York Stock Exchange, where volume came to 1.96 billion shares compared with 1.73 billion shares traded Wednesday.

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 4.01 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 said 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.

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 $4.86, or 13.5 percent, to $40.80.

"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 that gained, 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 Mae rose $1.68, or 18 percent, to $10.93, while Freddie Mac rose $1.50, or 22 percent, to $8.33.

United Technologies rose $3.59, or 5.9 percent, to $64.70 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 $2, or 3.8 percent, to $50.34.

The Russell 2000 index of smaller companies rose 9.88, or 1.44 percent, to 696.63.

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.

[petro49l]

The Western Hemisphere brims with petroleum. Central and South American Countries lease sites reasonably and cheap. American Oil Companies will not lose revenue to wars, transport, and expensive drill sites. People need a lower price for gasoline. This country should refuse Saudi sludge and their ten-year plan for energy.

[gunshack1]

Why is it that when crude oil goes up, the price at the pump goes up the same day, but when crude oil price drop, the price at the pump doesn''t go down for at least a week?

[tootall10142]

FPOR EVERY SUCCESS STORY THERE ARE TEN ABOUT FAILURE AND THIEVES.

[gunshack1]

dan323231, Katie Couric works for CBS not NBC.

[vnveteran72]

I hope the Neocon Cheerleaders once again believe these Reich Wingnut lies, and invest EVERYTHING they have in stocks today. It''ll be so much fun watching the poor dimbulbs lose everything at the hands of their heroes......too funny.....

"But, but,....Shrub said everything was swell and the Great Depression #2 was only a Lib Fairy Tale".....
....*sniff*.....

[credibility2]

Why is it that when the trading price for crude goes up, even slightly, there''s an immediate hike in price at the pump, even on a daily basis, yet when crude trades down by dollars, there''s absolutely no reduction in the pump price? If the game is going to played to stick it to the consumer on the high side, it should also work in reverse, but greed is preventing this stabilizer. The price fix will continue as long as it''s allowed to continue.

[credibility2]

More shenanigans on the market to mask, cover-up and hide reality. I don''t believe any of it.

[greeneyes222]

Good for the stocks, because the price of gas sure isn''t going down as the price of oil falls.

We need to start questioning if everything that''s good for the stock market is good for the consumer.

[drinuk]

Oil dropping in value !!! This is serious, how on earth will Western Governments cope with recession if the percentage falls on the Gas Tax, it will be a clamity. Of course I remember now, they will put the tax up as the price drops, OPEC were quite right, that governments in America and Europe are taking a bigger slice than the producers.

Expect a Tax hike if the price falls.

[gunfighter51]

It''s going to be another sad day for the liberals as the oil bubble is about to burst.

I always enjoy watching BIG LIBERAL cry.

[daysrnumbrd]

Stock market --- primarily driven by SPECULATION

Oil prices --- primarily driven by SPECULATION

Thus, the tide can and will shift at any moment for any reason.


Good night.

[cyberus-2009]

Have no fear!

A camel is SURE to *** within 100ft of a oil rig and set off a "fear of methane explosion" amongst speculators to keep the price of gas up.

[alphaa10-2009]

NEVER TOO LATE TO WORRY

Optimism is entirely premature--

1. A fever of 105F which abates to "only" 101F is not a rally, but a slight respite. When Bush took office-- before speculators began their dirty work on the market-- gas was $.99 a gallon, and the Saudis were on reasonably good terms. As Bush leaves office, gas is over $5.25 a gallon, and Sunni and Shia states want us to stay out of their region.

2. The floor price for oil continues the creature of speculation by sharks who understand a feeding frenzy can make them rich. And to hell with everybody else-- Bush lessez faire policy at its worst. The regulatory acumen to handle an amoral, NON-self-regulating market economy requires more understanding of public interest than Bush or minions ever claimed, much less possessed.

(See "Never Too Late to Worry" -- 2)

[alphaa10-2009]

NEVER TOO LATE TO WORRY-- 2

3. The same speculators are now busy, via hedge funding, buying up other increasingly scarce commodities which people must have to live. For example, food and water.

Yes, you read correctly-- the Fund People are buying large argicultural holdings around the world to manipulate prices as they never have before. Ditto for water. Coca Cola, Nestle, Pepsi and other corporate giants show an unseemly taste for acquiring control of public water supplies.

See link--
http://www.stopcorporateabuse.org/cms/page1131.cfm

[lovegetpeace]

Oh no! Oil prices are dropping. With Americans always having such a nano short memory, SUV sales will soon break all time high record and Bicycle sales will break all time low record. Mama Mia!

[lovegetpeace]

Oh no! Oil prices are dropping. With Americans having a nano short memory. SUV sales will soon break all time records. Bicycle sales will drop like a ton.

[shanev137]

So basically..... "the whole global oil shortage" that happened in the past few weeks, that drove prices to record highs, was not severe enough to offset Americans cutting back on putting gas in their cars.

So once again I was right.....American consumption is what''s driving oil prices.....NOT CHINA....and NOT INDIA !!!

All you "supply and demand people" out there getting that yet? hahahahaha

[dan3232321]

Because NBC''s web site doesn''t allow commentary, I just want to say publicly that their nightly news with Katie Couric is the most pathetic, one-sided, miserable excuse for a news broadcast I have ever seen. Last night, Katie''s opening story was how bad inflation was - like we didn''t already know that and why we have inflation. At this same time she totally ignored the phenominal rally in the stock market because the perception is that the bottom of this recession may be near until her normal stock market review later in the broadcast. Today, she at least had the guts to briefly report about a 2nd great day in the stock market but immediately cut away to Merril Lynch''s bad earnings report. Katie Couric would simply rather slit her own throat than report anything positive this soon before a presidential election. Bad news is good news for Democrats! Its almost as transparent as her virtual mouth-kissing of Hilary Clinton!

[shanev137]

"People are reacting to the high prices," oil trader Ray Carbone told CBS News. "They''re just not using the gasoline and that has been causing prices to drop."


----------


HOLY COW !!!!

YA THINK ????

GOLLY GEE WILLICKERS YOU''RE SMART !!!!

GOOD THING THAT COMPANY IS PAYING YOU 200K A YEAR !!!

[nskduke2]

Noaanhc,You are right.Lets just hope that the American people are learning a lesson here.