NEW YORK – Stocks finished marginally higher Thursday as investors overcame a bout of profit-taking and China's first rate increase in nine years to focus on a drop in crude oil prices to near $50 a barrel.
The Dow Jones industrial average (search) rose 2.51 points, or 0.03 percent, to end at 10,004.54. The Standard & Poor's 500 Index (search) inched up 2.04 points, or 0.18 percent, to 1,127.44. The technology-laced Nasdaq Composite Index (search) advanced 5.75 points, or 0.29 percent, to 1,975.74.
The gains marked a pause for breath after two days of strong rallies, boosted by a tumble in crude prices. On Monday, the Dow hit a fresh low for 2004. Technology-related stocks showed particular strength, with the Nasdaq closing at its highest since July 2.
"Today's reaction is really a response to a very powerful up move over the prior few days -- we went from being very oversold to almost very overbought," said Jack Caffrey, equity strategist at JP Morgan Private Bank.
Concern over China's decision to raise its benchmark interest rate for the first time in nine years pressured materials and energy stocks, as investors worried about slower demand from the world's fastest-growing economy. However, the move also encouraged selling in oil.
"I think with China raising rates and slowing down its infrastructure buildout, you really have to rethink positions in commodities, because the demand equation will change," said Chris Wolfe, global head of equities for J.P. Morgan Private Bank. "So with metals and oil, we'll see some of the speculation move out of the market, and that could help with some upside potential in stocks."
Oil prices dropped past $51 per barrel, continuing Wednesday's sharp retreat and coaxing stock buyers back into the market in afternoon trading. A barrel of light crude closed at $50.92, down $1.54, on the New York Mercantile Exchange (search), the lowest close for oil futures since Oct. 4's price of $49.91 a barrel.
Unemployment questions weighed on some investors, as the Labor Department (search) reported a sharp uptick in first-time jobless claims last week. The number of Americans filing for unemployment for the first time rose to 350,000, up 20,000 from last week — the largest jump in a month.
Among metals and mining firms, Alcoa Inc. (AA) , the world's largest aluminum producer and Dow component, was down 2.9 percent, or 96 cents, at $32.41, while Phelps Dodge Corp. , the world's largest publicly traded copper producer, was down nearly 4 percent, or $3.46, at $84.69.
The Morgan Stanley commodities-related equities index fell 1.66 percent to its lowest in more than a week, led lower by oil, mining and metals stocks.
"The China news caught everybody off guard," said Bryan Piskorowski, market analyst at Wachovia Securities LLC.
"Here in the U.S. we're used to getting the message telegraphed way before it's ever done."
As the oil price slid, stocks of oil companies fell. ConocoPhillips (COP) fell more than 2 percent, or $1.94, to $82.98, while Dow component Exxon Mobil Corp. (XOM) slipped 34 cents, or 0.7 percent, to $48.61.
Earlier in the day, Exxon Mobil, the world's largest publicly traded oil company, reported a 56 percent jump in quarterly profit, driven by soaring oil and natural gas prices, and strong results from refining operations.
In one of the more notable initial public offerings of the year, DreamWorks Animation SKG Inc. (DWA) — the studio responsible for the "Shrek" franchise — jumped $10.75 from its $28 offering price to close at $38.75 per share.
Gillette Co. (G) helped limit losses on the S&P 500. It jumped 5.2 percent, or $2.07, to $41.99, after its third-quarter profit rose 14 percent, driven by sales of higher-priced products such as its battery-powered M3Power men's razor and hurricane-spurred sales of Duracell batteries.
Verizon (VZ) slipped 2 cents to $39.38 after it too beat estimates by a penny per share. While profits were flat for the third quarter compared to a year ago, the Dow component's wireless division turned in a strong performance, adding 1.7 million new customers.
Aetna Inc. (AET) reported a nearly 500 percent increase in third-quarter profits, crediting higher membership and a one-time tax credit for the gains, which beat Wall Street estimates by 11 cents per share. The company also brightened its outlook for future profits. Aetna surged $4.66 to $96.41.
Although Viacom Inc. (VIAB) swung to a loss in the third quarter due to a $1.5 billion charge for the spinoff of its Blockbuster video rental chain, the company's operating earnings still surpassed Wall Street expectations by a penny per share. Viacom gained $1.15 to $36.50.
Defense company Raytheon Co. (RTN) was up 79 cents at $37.45 after it swung to a profit on a 13 percent increase in revenues. The company beat analysts' forecasts by 4 cents per share.
Trading was heavy, with 1.6 billion shares changing hands on the New York Stock Exchange, above the 1.4 billion daily average for last year. About 1.8 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year.
Advancers outnumbered decliners on the NYSE by about 6 to 5, while advancers and decliners were about even on Nasdaq.
The Russell 2000 index of smaller companies was down 1.56, or 0.3 percent, at 585.62.
Overseas, Japan's Nikkei stock average rose 1.51 percent. In Europe, Britain's FTSE 100 closed down 0.27 percent, France's CAC-40 climbed 1.18 percent for the session, and Germany's DAX index gained 0.78 percent in late trading.
Reuters and the Associated Press contributed to this report.