Wall Street rallied yesterday as oil prices tumbled, the service sector reported strong growth, and investors embraced large-cap stocks...
NEW YORK — Wall Street rallied yesterday as oil prices tumbled, the service sector reported strong growth, and investors embraced large-cap stocks such as Wal-Mart and Home Depot.
The Dow Jones industrial average rose 141.87 to 10,589.24, its best one-day gain since July 8.
Microsoft, one of the 30 Dow stocks, slipped 2 cents to close at $27 a share. Boeing, also a Dow stock, gained 69 cents to $65.03.
The Standard & Poor’s 500 index gained 15.37 to 1,233.39, its best session since April 21. The Nasdaq composite index added 25.79 to 2,166.86 for its best point gain since July 19.
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Investors rejoiced as crude oil and gas futures dipped following the decision by industrialized nations to release 60 million barrels of crude from strategic stockpiles in the wake of Hurricane Katrina. A barrel of light crude settled at $65.96, down $1.61, on the New York Mercantile Exchange, while gasoline prices on the exchange fell 13 cents to $2.05 per gallon.
“Today was a relief rally; it was an oil-price relief story,” said Lynn Reaser, chief economist of the investment strategies group at Bank of America. “Oil prices are still very high, but much more moderate than the worst fears of last week.”
Stocks started the session substantially higher after the positive report on business activity in the services sector. The Institute for Supply Management, which surveys 370 U.S. businesses, said its non-manufacturing index rose to 65 percent in August from 60.5 percent in July. Any reading above 50 indicates the sector is expanding; the August reading was the best since April 2004.
Hopes that interest rates would stop climbing also buoyed the markets. Last week’s softer-than-expected economic data reinforced some traders’ belief that the Federal Reserve would stop its year-campaign of short-term interest rate hikes earlier than it had planned, said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco.
Last week’s data included a Commerce Department report that Americans spent more than they earned in July for just the second time in 46 years. The Institute for Supply Management manufacturing index fell in August and a monthly index of industrial purchasing activity from Chicago also dropped dramatically.
Koesterich, however, is skeptical about whether traders’ views on the Fed are correct. As far as the economy goes, “I’m not sure anything has necessarily changed,” he said. “We have seen some economic deceleration, but it doesn’t mean the Fed is going to pause.”
In company news, Dow industrials Home Depot and Wal-Mart climbed on expectation of rebuilding after Katrina and an analyst’s upgrade, respectively. Home Depot rose $1.38 to $41.71 after the company said five of its stores remained closed because of Katrina, but it hopes to reopen three by week’s end.
Wal-Mart said its shuttered stores represent a minor portion of the world’s largest retailer’s 3,800 outlets. The company also reiterated that Hurricane Katrina could hurt its sales for September. Wal-Mart climbed $1.14 to $45.69.
Troubled vaccine maker Chiron jumped 72 cents to $43.51 after its board rejected an all-cash takeover offer from Novartis, saying the offer is inadequate. Novartis offered $40 per share. Novartis shares added 18 cents to $49.28.