NEW YORK – Stocks rallied Tuesday as Wall Street welcomed a sudden tumble in crude oil prices and an encouraging advance in consumer confidence for June.
It was the first positive close for the Dow in seven sessions.
The Dow Jones industrial average (search) jumped 114.85 points, or 1.12 percent, to end at 10,405.63. The Standard & Poor's 500 Index (search) gained 10.88 points, or 0.91 percent, to close at 1,201.57. The technology-laced Nasdaq Composite Index (search) advanced 24.69 points, or 1.21 percent, to finish at 2,069.89.
June consumer confidence climbed to a three-year high of 105.8 and exceeded the forecast of 104 from economists polled by Reuters. The number is closely watched since consumer spending represents a large chunk of the U.S. economy.
One day after closing above $60 per barrel for the first time, crude futures collapsed as investors took profits from the recent surge in energy prices. Crude for August delivery fell $2.34 to settle at $58.20 a barrel on the New York Mercantile Exchange (search).
"The fact that oil prices fell today as energy traders took profits helped," said Peter Cardillo, chief market strategist at SW Bach & Co. "No question that consumer confidence that surged in spite of higher energy prices is encouraging."
Over the last several trading sessions, stocks have fallen as oil prices climbed. The blue-chip Dow average and the broader S&P 500 both closed at their lowest levels in more than a month Monday as oil settled at $60.54, its first close above $60 in the 22 years since oil futures began trading on the New York Mercantile Exchange. Earlier Monday, August crude hit a 22-year NYMEX record at $60.95.
High oil prices boost companies' expenses and eat away at consumers' discretionary spending budgets.
Tuesday's sharply lower oil futures prices also helped airline stocks, such as Delta Air Lines Inc. (DAL), up nearly 13 percent, or 45 cents, at $3.97, and AMR Corp. (AMR), the parent company of American Airlines, up 9.3 percent, or $1.04, at $12.25. The Dow Jones Transportation Average, which includes Delta, AMR, and other airline and shipping company stocks, rose 2.5 percent.
Shares of Dow component Wal-Mart Stores Inc. (WMT), the world's biggest retailer, rose 1.9 percent, or 91 cents, to $48.43, after the drop in crude prices.
"Another factor that helped the market rebound is that we did not get too many negative earnings announcements," Cardillo said.
Investors will get another gauge of the economy's health Thursday, when the Federal Open Market Committee (search) is expected to raise the key federal funds rate to 3.25 percent from 3 percent and give some indication of how much longer it will continue its campaign of rate hikes. The Fed began raising rates last June.
Advanced Micro Devices Inc. (AMD) rose $1.02 to $17.70 after the semiconductor maker sued rival Intel Corp. for antitrust violations. AMD claims Intel has a monopoly in computer processors and has forced customers into exclusive contracts to protect that monopoly. Intel added 22 cents to $26.08 on the news.
Shares of Apple Computer Inc. (AAPL) rose 0.6 percent to $37.33 after the company released details of coming changes to its line of iPod digital music players and related iTunes software.
General Electric (GE) said Tuesday it expects revenue from emerging markets such as China and India to at least double to about $55 billion by 2010. Shares of GE, a Dow component, advanced 1.1 percent to $34.98.
Sirius Satellite Radio (SIRI) shares jumped after the company announced Tuesday plans to launch Chinese- and Korean-language streams. Shares of Sirius rose 5.5 percent to $6.32.
IBM Corp. (IBM) announced late Monday that the Securities and Exchange Commission has launched an informal probe into how the company released data on its employee stock option accounting. IBM nonetheless climbed $1.42 to $75.30.
Sun Microsystems Inc. (SUNW) gained 5 cents to $3.74 after it announced it would buy business software maker SeeBeyond Technology Corp. for $387 million in cash, or $4.25 per share. SeeBeyond surged 30.7 percent, or $1.01, to $4.29..
Advancers outnumbered decliners on both the New York Stock Exchange and the Nasdaq by about 3 to 1.
Volume was moderate, with 1.37 billion shares changing hands on the NYSE, below the 1.46 billion daily average for last year, while on Nasdaq, about 1.62 billion shares traded -- below the 1.81 billion daily average last year.
The Russell 2000 index of smaller companies was up 13.17, or 2.1 percent, at 641.48.
Overseas, Japan's Nikkei stock average rose 0.87 percent. In Europe, Britain's FTSE 100 closed up 0.93 percent, France's CAC-40 climbed 0.88 percent for the session, and Germany's DAX index gained 0.74 percent.
Reuters and the Associated Press contributed to this report.