NEW YORK (Bloomberg) — Energy and financial shares yesterday rallied on prospects for higher earnings, carrying the stock market mostly higher for a second consecutive day.
Exxon Mobil Corp., the largest crude oil producer, helped lift the Standard & Poor's 500 Index and Dow Jones Industrial Average after energy prices rebounded. Morgan Stanley, Lehman Brothers and Goldman Sachs climbed on expectations new securities regulations will help bolster the banks' earnings in the second half of the year.
The Nasdaq Composite Index dropped for the fourth time in five days, led by Apple Inc. One stock rose for every one that fell on the New York Stock Exchange, on light trading volume.
Stocks recovered after surging Treasury yields sent both the S&P 500 and Dow on their steepest weekly slide since February. Bond yields pared an earlier advance yesterday and have retreated 0.10 percentage point from their high last week.
"We still think that stocks have room to rally," said Sean Clark of Clark Capital Management in Philadelphia. "Valuations are very palatable currently for the market and stocks are cheap relative to bonds."
The S&P 500 gained 1.45, or 0.1 percent, to 1509.12. The Dow increased 0.57 to 13,424.96. The Nasdaq Composite Index lost 1.39, or 0.1 percent, to 2572.15. The Russell 2000 Index of smaller companies dropped 0.3 percent to 833.18.
"Energy is leading the way again; the bull market seems intact to me," said Tom Wirth of Chemung Canal Trust. "In the long run, the M&A activity is maintaining a floor on the market."
Energy shares rose 0.7 percent for the second-biggest gain in the S&P 500 after oil for July delivery rose $1.21 to $65.97 a barrel in New York. Exxon added 38 cents to $83.06. ConocoPhillips, the U.S. refiner, rose 58 cents to $77.87.
Morgan Stanley, Lehman Brothers Holdings and Goldman Sachs led financial shares higher. Analysts say the biggest U.S. securities firms may show higher profits in the second half of the year with a rule change that allows them to hold less money in reserve for potential losses.
Wall Street firms are expected to post the slowest earnings growth in two years when they report second-quarter results.
Goldman rose $2.10 to $227.16. Lehman added $1.49 to $75.68. Morgan Stanley gained $1.44 to $88.54, its highest price since February 2001.
General Motors climbed 77 cents to $31.77, the steepest gain in the Dow. GM, Ford Motor Co. and DaimlerChrysler's Chrysler unit may propose in next month's labor talks that the United Auto Workers union manage a health care fund financed by the automakers, sources said.
Ford advanced 16 cents to $8.40. The carmaker is seeking buyers for its Volvo, Jaguar and Land Rover brands in Europe, sources said. The company is trying to focus its recovery on North America, said the sources.
H&R Block Inc. added $1.06, or 4.7 percent, to $23.58. UBS encouraged investors to buy the stock, saying the company may receive a takeover bid after the sale of its mortgage unit.
UST Inc. surged $2.87, or 5.6 percent, to $54.35 for the biggest gain in the S&P 500. The largest U.S. snuff maker advanced the most in almost five years after UBS raised its rating on the stock and said the company will benefit from more competition in the tobacco market.
Declining steel makers limited gains in the S&P 500 after Nucor Corp., the second-largest U.S. producer, said profit may fall on slumping demand by automakers and home builders. The shares fell $3.95, or 5.9 percent, to $62.66.
U.S. Steel Corp., the biggest U.S. steel maker, lost $8.85, or 7.1 percent, to $116.20.