- The Washington Times - Wednesday, May 11, 2005

NEW YORK (AP) — A late-session rally fed by falling oil prices pushed stocks higher yesterday, although Wall Street’s mood remained tentative amid uncertainty about the economy.

The drop in oil prices — coming as the U.S. government reported a larger-than-expected stockpile of oil and gasoline — removed a key obstacle for stocks to move higher. A barrel of light crude settled at $50.45, down $1.62, on the New York Mercantile Exchange.

The news about the trade deficit, which shrank to its lowest level in six months, also encouraged investors who had feared an economic slowdown. The Dow Jones Industrial Average rose 19.14, or 0.19 percent, to 10,300.25.

Broader stock indicators also moved higher. The Standard & Poor’s 500 Index was up 4.89, or 0.42 percent, at 1,171.11, and the Nasdaq Composite Index gained 8.78, or 0.45 percent, to 1,971.55.

Stocks took a sharp dive around midday after the White House and Capitol were evacuated because of an off-course aircraft. When the plane was diverted from Washington, the major indexes slowly began to move higher.

Contributing to investors’ uncertainty were comments by Federal Reserve Bank of St. Louis President William Poole, a member of the Fed’s rate-setting committee. He was quoted by Dow Jones Newswires as saying the Fed’s stated intent to raise rates at a measured pace “should not be viewed as an ironclad commitment.”

The statement, while nuanced, raised the specter of stagflation, a situation in which inflation rises even as economic growth starts to slow and which still could force the Federal Reserve to raise interest rates.

The Commerce Department reported that the nation’s trade deficit fell sharply in March as U.S. exports climbed to an all-time high, good news for exporting companies. The surge of textile shipments from China slowed. The deficit narrowed by 9.2 percent to $54.99 billion, down from the record monthly deficit of $60.57 billion set in February.

Late Tuesday, Cisco reported earnings for the latest quarter, excluding special items, of $1.5 billion, or 23 cents per share, beating Wall Street analysts’ expectations by a penny a share. The maker of data networking gear also said its third-quarter sales jumped more than 10 percent, and it expects sales to grow this quarter. Cisco was up 34 cents at $18.55.

The Dow fell 103.23, or 0.99 percent, Tuesday amid rumors that some hedge funds may have been whipsawed last week, when investor Kirk Kerkorian announced an offer for General Motors Corp. stock and Standard & Poor’s downgraded the Dow component’s bonds to junk status. Massive losses at hedge funds could force them to liquidate holdings, flooding the market. GM stock fell 53 cents to $31 yesterday.

Eastman Kodak Co., in the midst of a difficult transition from film-based photography to digital, rose $1.13 to $26.58 after it said Chief Executive Officer Daniel Carp would step down in favor of his second-in-command, Antonio Perez.

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