NEW YORK – Stocks ended higher Monday, as positive news about Genentech's cancer drug boosted biotech shares after a day of lackluster trading dominated by rising oil prices and inflation worries.
The Dow Jones industrial average (search) was up 30.15 points, or 0.28 percent, to finish at 10,804.51. The Standard & Poor's 500 Index (search) was up 6.75 points, or 0.56 percent, to end at 1,206.83. The Nasdaq Composite Index (search) was up 9.44 points, or 0.46 percent, to close at 2,051.04.
"Investors remain very, very concerned, and they should be, that we're headed toward higher inflation and higher interest rates," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "No matter how you say it, higher inflation and interest rates is the biggest risk that faces the stock market in 2005, and we are now seeing why."
Genentech (DNA) surged nearly 25 percent, or $10.92, to $55, after the National Cancer Institute said Avastin helps lung cancer patients live longer when combined with standard chemotherapy. The American Stock Exchange Biotechnology index rose nearly 5 percent.
"Part of this rise is on the Genentech news -- there was a huge jump in the whole biotech index," said Brian Williamson, vice president, equity trading, The Boston Co. Asset Management. "But today has been a very slow day. It's the second Monday in a row where institutions have been sitting on their hands. The flow has been very light and it's been very quiet."
During most of the session, oil prices drove the market. Stocks nudged up in the morning as crude fell, but turned lower in early afternoon as oil prices reversed course and rose. A barrel of light crude settled at $54.95, up 52 cents, on the New York Mercantile Exchange (search). Earlier, April crude climbed as high as $55.05, driven up partly by a rally in natural gas futures on forecasts of colder weather.
News of a successor to Michael Eisner at The Walt Disney Co. and a new chief executive officer at American International Group Inc., along with acquisitions by Dow Jones industrials Altria Group Inc. and IBM Corp., produced modest gains. However, the markets were unable to escape the inflation worries that sent stocks substantially lower last week.
Online bazaar eBay Inc. (EBAY) dragged on the Nasdaq, falling nearly 5 percent, or $1.77, to $36.48. One analyst cited concerns about how long Chief Executive Meg Whitman will stay at the company.
Insurance company American International Group (AIG) weighed on the Dow. AIG fell 86 cents to $63.85. The Wall Street Journal and CNBC reported Monday that Maurice Greenberg will step down as chief executive of the group, as the insurance company attempts to distance itself from several regulatory inquiries.
Heavy equipment maker Caterpillar Inc. (CAT) pulled on the Dow as it fell about 2.5 percent, or $2.47, to $96.53 after Legg Mason analyst Barry Bannister lowered his rating on the company to "hold" from "buy," saying the stock is fairly valued in the short term near $100.
Office Depot Inc. (ODP) also announced a management change, naming AutoZone Inc. CEO Steve Odland as its new chairman and chief executive. Office Depot rose $1.56 to $20.75 on the news.
Philip Morris, the tobacco arm of Altria Group Inc. (MO), is bidding $5 billion to buy Indonesian tobacco firm PT Hanjaya Mandala Sampoerna Tbk. Altria climbed 3 cents to $69.17.
Qwest Communications International Inc. (Q) rose 6 cents to $3.91 after news reports said the telecommunications company would sweeten its currently $8 billion offer for MCI Corp. MCI had already agreed to a $6.75 billion deal to be acquired by Dow component Verizon Communications Inc., but said it will continue discussions with Qwest. MCI was up 9 cents at $24.18, while Verizon edged a penny higher to $36.08.
Overall, trading was moderate, with 1.44 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.71 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year. Advancers outnumbered decliners on the New York Stock Exchange by 6 to 5 and by 8 to 7 on Nasdaq.
The Russell 2000 index of smaller companies was up 3.46, or 0.6 percent, at 630.30.
Overseas, Japan's Nikkei stock average fell 0.62 percent. In Europe, Britain's FTSE 100 closed down 0.14 percent and France's CAC-40 slid 0.02 percent for the session, while Germany's DAX index rose 0.16 percent.
Reuters and the Associated Press contributed to this report.