NEW YORK – Stocks rose on Wall Street Thursday as crude oil hit a record $66 a barrel, boosting energy stocks, while wireless technology company Qualcomm rose on an acquisition. Market sentiment remained tense, however, as traders pondered the economic implication of sky-high energy prices.
The Dow Jones industrial average (search) rallied 91.48 points, or 0.86 percent, to end at 10,685.89. The Standard & Poor's 500 index (search) gained 8.68 points, or 0.71 percent, to finish at 1,237.81. The technology-laced Nasdaq Composite Index (search) climbed 16.74 points, or 0.78 percent, to close at 2,174.55, putting it marginally higher for the year.
"The market is still being buoyed by the energy sector. I am totally baffled by the fact that the market is ignoring higher energy prices," said Paul Mendelsohn, chief investment strategist at Windham Financial Services. "But at some time, higher energy prices will have an impact."
U.S. crude oil futures hit a fresh intraday high for the fourth time this week, climbing to $66 a barrel as traders worried about disruptions in the flow of crude and gasoline supply amid refinery snags, as well as Iran's nuclear activities, which put it at odds with the United Nations' atomic watchdog.
Crude for September delivery rose 90 cents to settle at $65.80 per barrel on the New York Mercantile Exchange, after setting the record.
While higher oil prices are generally considered bad for stocks as they hurt corporate profits and curb consumer spending, they can also increase oil companies' earnings, driving their shares up.
"I think in the end people want to be bullish," said Doug Sandler, chief equity strategist at Wachovia Securities in Richmond, Va. "Some of that is a trend building on a trend — the market starts to go one way and everybody seems to jump on it."
But the ups and downs in stock prices seen Thursday, following a selloff Wednesday, reflects persistent worries by investors that, despite strong corporate earnings and upbeat economic reports, oil prices will eventually exact a toll.
"Ordinarily you would expect the stock market to rise or do better, but it's not and I think the reason it's not is it's being held in check by high oil prices," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors in Albany, N.Y.
"Oil prices will continue to be a nagging concern," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn.
Shares of Exxon (XOM), the world's largest publicly traded company, jumped 1.8 percent, or $1.05, to $60.95 during the regular trading session on the New York Stock Exchange. It was one of the blue-chip average's biggest gainers.
And the stock of oil company ConocoPhillips (COP) gained 1.2 percent, or 76 cents, to $66.40, helping lift the S&P 500. The American Stock Exchange index of energy companies was up 0.86 percent.
Year to date, the S&P 500 energy sector is up more than 32 percent.
After the closing bell, Dell's (DELL) stock dropped 8 percent to $36.40 on the Inet electronic brokerage system after its revenue outlook fell short of analysts' expectations. Dell's CEO Kevin Rollins attributed the lower third-quarter revenue forecast to weakness in federal government spending and in the low end of its consumer personal computer business.
The last time Dell's stock fell so much in a single day was Sept. 20, 2001, when it lost 8.3 percent.
"The disappointment in Dell's results came from its guidance and that is obviously going to really impact the technology sector tomorrow and you could see a pullback," Pleimann said.
During the regular session, shares of media company News Corp. (NWS) rose 3.4 percent, its biggest 1-day percentage gain in nine months, to $18.03, after it reported earnings that topped Wall Street estimates.
McDonald's Corp. (MCD) also helped lift the Dow average, hitting a 4-1/2-year high before closing 6 percent higher at $34.69, as investors snapped up call options on the stock for the second straight day, prompted by market talk that private equity firms may be interested in acquiring a stake in the fast-food restaurant chain for certain real estate assets, according to traders.
Alcoa Inc. (AA), also a Dow component, rose 3 percent, or 90 cents, to $29.77 as analysts at brokerage UBS raised the investment rating on the world's largest aluminum producer to "buy" from "neutral."
Qualcomm Inc. (QCOM) was the Nasdaq's biggest gainer, rising 3.2 percent, or $1.27, to $40.48 after the supplier of wireless chips and technology licenses said it would buy Flarion Technologies to expand its wireless technology portfolio.
But Dow component Intel Corp. (INTC), the world's largest semiconductor company, fell 0.22 percent, or 6 cents, to $26.82 on Nasdaq after Goldman Sachs downgraded Intel, saying its margins are near their peak, with little impetus for improvement.
Shares of Yahoo Inc. (YHOO) climbed 2.2 percent, or 75 cents, to $34.94 after the Internet media company said it will pay $1 billion for 40 percent of Chinese Web auctioneer Alibaba.com.
Target Corp. (TGT) rose 11 cents, or 0.20 percent, to $55.65, after the discount retailer posted a steep decline in second-quarter profits, but strong sales that beat Wall Street estimate.
Others stocks trading actively included Whirlpool Corp.(WPL), which on Wednesday raised its bid for competitor Maytag Corp. (MYG) a third time, to $1.79 billion, or $2.7 billion including the assumption of debt. Whirlpool's stock fell 83 cents, or 1.02 percent, to $80.70. Maytag declined 21 cents, or 1.11 percent, to $18.79.
Investors digested new data from the Commerce Department (search) showing retail sales rose 1.8 percent in July, less than analysts had expected. The increase came despite weak demand at department stores. Almost all the increase deriving from auto sales, which jumped 6.7 percent. Excluding autos, retail sales rose just 0.3 percent, half the gained forecast by economists.
In another report, the Labor Department (search) said the number of Americans filing claims for unemployment benefits declined last week by 6,000 — the first drop in three weeks — to 308,000.
The Russell 2000 index of smaller companies rose 6.21, or 0.94 percent, to 666.37.
Overseas, Japan's Nikkei stock average rose 1.4 percent. Britain's FTSE 100 fell 0.4 percent, Germany's DAX index lost 0.7 percent, and France's CAC-40 declined 0.4 percent.
Reuters and the Associated Press contributed to this report.