- The Washington Times - Wednesday, July 23, 2008

NEW YORK | Wall Street shook off early doldrums and closed sharply higher Tuesday after another drop in oil prices encouraged investors to set aside financial-sector worries and go bargain hunting across the market. The Dow Jones Industrial Average rose more than 130 points.

Stocks initially fell with uneasiness about the continuing impact of the housing market downturn and the credit crisis on financial company earnings. Disappointing results from Wachovia Corp., among others, fed those worries.

But a $3 drop in oil — which took crude’s decline in recent weeks to nearly $20 a barrel — persuaded some investors to wade back into equities.

Even Wachovia Corp., the nation’s fourth-largest bank, shot 27 percent higher after its stock tumbled to levels not seen since the early 1990s. The stock was pummeled after the retail bank posted an $8.9 billion loss because of charges and reserves for bad mortgage loans.

The focus on higher oil’s impact on the economy has been so intense that any notch lower breeds optimism that the commodity’s run-up might perhaps be nearing an end, analysts said. That means, for the moment, corporate earnings reports have lost some of their dominance of the market.

The market was looking at the long-term impact of somewhat cheaper energy — and likely betting that company earnings would pick up if oil extends its decline.

“There’s been so many people speculating about oil taking off and how to handle it, the whole economy has been focused on it,” said Todd Leone, managing director of equity trading at Cowen & Co. “Just the fact that it has dropped — a big move down — helps out. There’s the perception that this will get the economy going again.”

Global banks and brokerages have written down some $300 billion of mortgage-backed securities and other risky investments since the crisis began last year. Investors also got a fresh look at how much the turmoil has hurt financial companies. After Tuesday’s closing bell in New York, both Washington Mutual Inc. and E-Trade Financial Corp. reported losses after boosting reserves to cover bad loans.

The Dow rose 135.16, or 1.18 percent, to 11,602.50. The blue-chip index rose 400 points last week, but ended Monday’s session slightly lower.

Broader indexes also rose Tuesday. The Standard & Poor’s 500 Index jumped 17.00, or 1.35 percent, to 1,277.00. The technology-dominated Nasdaq Composite Index, which was down for much of the session on tech earnings disappointments, ended up 24.43, or 1.07 percent, at 2,303.96.

A barrel of light, sweet crude tumbled $3.09 to settle at $127.95 on the New York Mercantile Exchange, down nearly $20 from its record high of $147.27, reached just weeks ago.

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