NEW YORK (AP) — Stocks got a lift from Federal Reserve Chairman Alan Greenspan yesterday, rising modestly after he said the recent climb in oil prices was already curbing demand for crude. Oil futures dropped sharply on the news.
Speaking to a group of U.S. petrochemical producers, Mr. Greenspan said more refining capacity was needed around the world, but that energy demand was already starting to soften — a trend that could help bring prices down. That assessment of the oil situation, investors believed, could keep the Fed from raising rates aggressively, because it appeared unlikely that inflation would accelerate as a result of higher prices.
Analysts, however, said that for the short term Mr. Greenspan’s comments didn’t change the fact that oil, which traded above $58 a barrel on Monday, remains near record highs, and interest rates are on the rise, too, gradually or not. The result was a trendless session on Wall Street that showed only a modest response to Mr. Greenspan’s comments.
“Nothing has really changed for the market. You have rising rates, decelerating earnings growth and you’ve got energy prices,” said Russ Koesterich, senior portfolio manager at Barclay’s Global Investors in San Francisco. “Energy continues to be a drag on the market because, sure, you’re down $1 a barrel today, but these prices are still high and they’ll start to bite into consumer spending at some point.”
The Dow Jones Industrial Average rose 37.32, or 0.36 percent, to 10,458.46.
Broader stock indicators also moved higher. The Standard & Poor’s 500 Index was up 5.27, or 0.45 percent, at 1,181.39, and the Nasdaq Composite Index gained 8.25, or 0.41 percent, to 1,999.32.
Crude oil futures dropped sharply after Mr. Greenspan’s remarks, with a barrel of light crude settling 97 cents lower at $56.04 on the New York Mercantile Exchange. Bonds were down narrowly, with the yield on the 10-year Treasury note rising to 4.47 percent from 4.46 percent late Monday. The dollar was narrowly mixed against other currencies, while gold prices rose.
Some investors sought bargains after March’s losses in the stock market. Many were still ambivalent and preferred to wait for next week, however, when first-quarter-earnings reports start in earnest. Also, oil prices have not fallen enough to give investors lasting relief, even with Mr. Greenspan’s comments.
“I think you’re getting at least a few investors, with an asset allocation point of view, seeing these lower prices and getting back into the market,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “The underlying economic fundamentals are pretty good, but you still have everyone’s favorite ghost — oil — making things very tentative.”
In corporate news, Verizon Communications Inc. rose 12 cents to $35.77 after the Dow component said it will drop its $7.5 billion bid for MCI Inc., if MCI says the recent $8.9 billion counterbid by Qwest Communications International Inc. is superior. Qwest rose 4 cents to $3.86, while MCI was down 7 cents at $25.01.
Analysts at Lehman Brothers cut their profit forecasts for the Home Depot Inc. for the quarter, 2005 and 2006, saying poor weather in the Northeast, deflationary trends in lumber prices and rising energy costs would all weigh on the company’s earnings. Home Depot nonetheless gained 32 cents to $38.23.
Online music service Napster Inc. raised its quarterly profit forecasts for the second time in a month as a result of better-than-expected sales and subscriptions. Napster climbed 57 cents, or 9.2 percent, to $6.74.
Advancing issues outnumbered decliners by 4 to 3 on the New York Stock Exchange, where volume came to 1.48 billion shares, compared with 1.64 billion traded on Monday.
The Russell 2000 index of smaller companies was up 0.74, or 0.12 percent, at 614.50.
Overseas, Japan’s Nikkei stock average rose 0.92 percent. In Europe, Britain’s FTSE 100 was up 0.94 percent, Germany’s DAX index gained 0.49 percent, and France’s CAC-40 climbed 0.88 percent.