U.S. Stocks Close With Gains After Oil Slides

NEW YORK (MarketWatch) -- U.S. stocks on Tuesday jumped higher as crude-oil futures sunk to one-week lows, helping equities steer away from the market's worst weekly drop since February.

Up and down much of the day, the Dow Jones Industrial Average gained steam as the afternoon progressed, gaining 68.72 points, or 0.6%, to finish at 12,548.35.

Of the Dow's 30 components, 20 ended with gains, led by Citigroup Inc. , up 2.6%, and IBM , which advanced 2.5%.

Blue-chip declines were led by General Motors Corp. , down 1% after Citigroup Global Markets Inc. downgraded the automaker to hold from buy.

"With the relentless surge in energy/commodities showing few signs of letting up, product mix shifts intensifying in recent weeks, credit constraints persisting in the face of policy measures, and Europe becoming a less reliable anchor for U.S. weakness, auto fundamentals are poised to deteriorate beyond 2008," Citi analysts said in a note.

Oil giants Exxon Mobil Corp. and Chevron Corp also weighed on the Dow, with both down around 1%.

The S&P 500 rose 9.42 points, or 0.7%, to 1,385.35, with information technology fronting sector gains, up 1.1%, and energy leading its declines, down 0.7%.

The technology-laden Nasdaq Composite gained 36.57 points, or 1.5%, to 2,481.24, with the tech sector's gains coming as analysts debated the coming proxy battle for control of Yahoo Inc. , with its board on the defensive after fending off would-be suitor Microsoft Corp.
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Commodities trade had crude and gold futures falling, with the front month for crude oil falling to $128.85 a barrel, down $3.34 for the session, while the gold contract for June delivery moved down $17.9, or 1.9%, to finish at $907.9 an ounce. , .

Treasury prices also fell, sending yields higher, as traders awaited the government's sale of $49 billion in debt this week. .

The dollar, however, maintained gains against major rivals, taking cues from the drop in crude, with the dollar index, which tracks the greenback against six major currencies, was up at 72.36. .

On the New York Stock Exchange, volume topped 1.1 billion, with advancing stocks edging ahead of those declining by almost 2 to 1. On the Nasdaq, nearly 760 million shares were exchanged, and advancers topped decliners, also by 2 to 1.

Consumers not so confident

The Commerce Department reported sales of new homes climbed in April for first time in six months, but economists said the gain was a rebound from a sharp drop the prior month and doesn't mark a turning point for the embattled housing market. .

Other economic gauges had the Conference Board reporting U.S. consumer confidence fell in May to a 16-year-low, as inflation expectations climbed along with gas prices. .

"We expect these weak confidence numbers to show through in feeble consumer spending going forward, despite the fact that stimulus checks are in the mail," said David Rosenberg, Merrill Lynch's North American economist.

Even San Francisco Federal Reserve President Janet Yellen, known as one of the Fed officials least worried about rising prices, said Tuesday it would be foolhardy for the central bank to be complacent about inflation. .

Before the bell, stock futures offered little reaction to the steepest drop in the 20-year history of the Case-Shiller home price index. The data released by Standard & Poor's had homes prices dropping 14.4% in the year through March. .

"The data reinforce the assumption of growing U.S. consumer angst in the face of soaring food and energy prices, and continued weakness in the housing market," said analysts at Action Economics.

The upbeat start for equities comes in the wake of heavy losses last week, with the Dow shedding nearly 4% of its value in what was the blue-chip benchmark's worst showing since February.

Active issues

In corporate developments, Vodafone Group PLC said CEO Arun Sarin will step down in July after a five-year tenure, with the world's largest mobile operator also reporting a record annual profit of more than $13 billion. .

Shares of Standard Pacific Corp. soared 48% on word a private-equity group had agreed to invest more than $530 million in the home builder. .

Hershey Co. jumped more than 9% amid unconfirmed talk the company could be a potential target for acquisition.

J.P. Morgan Chase & Co. , part of the Dow industrials, was up 1.6% after the financial institution and First Data Corp. said they had reached terms on ending their joint payments and merchant acquiring venture by the end of the year.

Anheuser-Busch Companies Inc. edged up after reports Belgian brewer InBev was pondering a merger with the maker of Budweiser and Michelob beers.

In overseas trading, markets ended mostly higher in Asia, with Toyota Motor Corp. among those gaining in Tokyo. .

In Europe, shares edged lower in a volatile session. .

By Kate Gibson