Stocks Rebound Despite Crude Price Spike

Stocks rose Tuesday as investors shrugged off rising energy prices, choosing instead to focus on good corporate news and Caterpillar's (CAT) raised d its revenue outlook.

The blue-chip Dow Jones industrial average (search) closed up 88.86 points, or 0.89 percent, at 10,077.40. The Standard & Poor's 500 Index (search) ended up 6.54 points, or 0.59 percent, at 1,110.06. The technology-laced Nasdaq Composite Index (search) ended up 9.99 points, or 0.54 percent, at 1,869.87.

Caterpillar, the world's largest maker of heavy equipment and a Dow component, was 3 percent higher at $76.90 after saying it expects 2004 sales to be up 25 percent to 30 percent, citing strong demand.

Light crude for November delivery surged above the psychologically important $50 milestone early in the session, but backed off that record high after Saudi Arabia indicated it would raise its output if necessary. Nervous about rising energy costs, investors had turned to the safety of Treasury bonds lately, but with the third quarter drawing to a close and oil prices easing, they seemed ready to return to stocks — especially after several sessions of equity declines.

"I'm very impressed by the market's resilience," said John Lynch, chief market analyst at Evergreen Investments in Boston. "The market had a nice turnaround." Stocks fell in the previous session, pushing the Dow below 10,000 for the first time in six weeks.

U.S. light crude ended the day at $49.90 a barrel, up 26 cents, amid fears of supply disruptions in Nigeria, OPEC's fifth largest producer. Prices had risen to a record $50.47 overnight, the highest since NYMEX (search) launched oil futures trading 21 years ago.

The boost in oil prices helped companies like ChevronTexaco Corp. (CVX), BP (BP) and Marathon Oil Corp. (MRO). Exxon Mobil Corp. (XOM) rose 1.1 percent to $48.53. ChevronTexaco rose 37 cents to $54.07 and Marathon Oil was up $1.06 at $41.52.

In economic news, U.S. consumer confidence edged lower in September for a second straight month as persistent worries about the job market weighed on sentiment, a report said.

Uncomfortably high oil prices have dogged the equity market for months, and the major indexes all posted steep declines over the last week amid mounting worries about rising business expenses and falling consumer spending. Analysts are largely upbeat about the market's underlying fundamentals, but given all the uncertainties surrounding energy costs, the jobs picture, the upcoming presidential election and persistent terror fears, few were convinced the upward move would last.

"If this rally didn't hold today, it wouldn't surprise me at all. I just can't imagine a lot of people getting really enthused right now, saying 'Gee, oil is near $50 a barrel, confidence is down, let's go buy some stocks,'" said Scott Wren, equity strategist for A.G. Edwards & Sons. "But hopefully if they're looking down the road, they'll see there are some stocks that have sold off, so if you're trying to position yourself for the next year, there are opportunities out there."

Google Inc. (GOOG) rose 7.3 percent, or $8.60, to $126.86, after several brokerage firms initiated coverage of the stock with high expectations, including Credit Suisse First Boston and J.P. Morgan.

Shares of coffee shop giant Starbucks Corp. (SBUX) added 20 cents to $44.58 after saying it would raise the average price of its beverages by 11 cents at its 4,500 stores across North America because of increases in the cost of coffee and sugar.

Delta Air Lines Inc. (DAL) lost 14 percent to $3.34 after the company said it will reduce executive and employee pay by 10 percent starting in January and its chief executive will go unpaid for the rest of the year as it tries to avert bankruptcy.

Alcoa Inc. (AA), the world's largest aluminum producer, rose more than 4 percent to $32.70 as aluminum prices hit their highest point since late April. Shares of copper producer Phelps Dodge Corp., also benefiting from recent 6-month highs in copper prices, climbed nearly 5 percent to $93.60.

Walt Disney Co. (DIS) fell 2.5 percent to $22.60 as Euro Disney , of which Walt Disney Co. owns 39 percent, said it had won the agreement of its creditors to a modified debt restructuring plan designed to save it from bankruptcy.

Chip maker Intel Corp. (INTC) and semiconductor equipment maker Applied Materials Inc. (AMAT) both slipped 1 percent, weighing on the Nasdaq. Intel said a plan to turn millions of desktop computers into hubs of wireless Internet access has been shelved after PC makers balked at the price.

Coca-Cola Co. (KO) shares rose 33 cents to $39.96 will refocus its attention on stanching a sales slump, as well as restructuring a profit-sharing arrangement with Coca-Cola Enterprises Inc. (CCE), its chief executive said in an interview with The Wall Street Journal. Coca-Cola had warned this month that profits would lag Wall Street expectations in the second half of 2004.

Shares of Nabi Biopharmaceuticals (NABI) jumped 17.3 percent, or $2.02, to $13.71 after the company's experimental nicotine vaccine showed promising results in helping smokers quit smoking in a mid-stage trial.

AtheroGenics Inc. (AGIX) soared 54 percent, or $12.53, to $35.69 on news that an interim analysis of a treatment to cut arterial plaque might help reverse the progression of heart disease.

Valero Energy Corp. (VLO) gained $2.04 to $79.09 after the oil refinery operator raised its third-quarter earnings forecast.

Lowe's Cos. (LOW) gained 33 cents to $53.76 after the home improvement retailer reiterated its earnings projections for the quarter and the year, and issued a bright forecast through 2006 based on an expectation of robust sales growth next year.

Shares of Snap-on Inc. (SNA) fell 12 percent, or $3.85, to $27.83 after the maker of vehicle-repair tools warned that earnings will fall short of Wall Street estimates due to high steel prices and weak business in Europe.

Chipmaker Cypress Semiconductor Corp. (CY) was down 29 cents at $8.60 after warning that lower-than-expected revenues would lead to a third-quarter loss on weakening demand and sluggish business improvement.

About 1.4 billion shares exchanged hands in active trading on the New York Stock Exchange where advancers outnumbered decliners about 2 to 1. On Nasdaq volume was 1.5 billion shares and nearly two stocks rose for each stock that fell.

The Russell 2000 index, which tracks smaller company stocks, was up 7.30, or 1.3 percent, at 565.66.

Overseas, Japan's Nikkei stock average fell 0.4 percent. In Europe, France's CAC-40 added 0.3 percent, Britain's FTSE 100 rose 0.6 percent and Germany's DAX index gained 0.2 percent.

Reuters and the Associated Press contributed to this report.