Shares Soar As Oil Hits 7-Week Low
Wednesday, July 30, 2008
A drop in oil prices and a slight bump in consumer confidence bolstered U.S. stocks yesterday, offsetting losses from the previous day and continuing what one analyst described as the "Jekyll and Hyde" nature of the financial markets in recent weeks.
"We're bouncing around pretty dramatically these days," said Andy Brooks, vice president and head of equity trading at T. Rowe Price.
The Dow Jones industrial average rose 266.48 points, or 2.39 percent, to close at 11,397.56. The broader Standard & Poor's 500-stock index was up 28.83 points, or 2.34 percent, to close at 1263.20. Meanwhile, the technology-driven Nasdaq composite index was up 55.40, or 2.45 percent, to close at 2319.62.
Driving yesterday's gains was yet another drop in oil prices, which tumbled to their lowest level in seven weeks. A barrel of light, sweet crude on the New York Mercantile Exchange fell $2.54, to $122.19.
"Every time the price of oil takes a dive, the market surges," said Ed Yardeni, chief investment strategist for Yardeni Research. "Investors are becoming increasingly confident that we may have well seen the peak in crude oil prices."
Meanwhile, data released yesterday by the Conference Board suggest that consumers are more upbeat about the economy than they were last month. The group's index of consumer confidence edged up to 51.9 in July from 51 in June.
All this contributed to optimism among investors despite more troubling news on the housing front yesterday.
Home prices continued to plunge in May, with the steepest drops in areas where prices once soared, according to the S&P/Case-Shiller index, a widely watched measure of the housing market's health.
The prices of previously owned single-family homes in 20 major metropolitan areas fell nearly 16 percent from last May, the steepest year-over-year drop since Standard & Poor's started publishing the data in 2000.
The index measures repeat sales or refinancings of single-family houses.
In the Washington market, the price declined 15.4 percent in May from a year earlier; it's down nearly 21 percent from the peak, in May 2006.
This information dovetails with other figures, released last Thursday by the National Association of Realtors, indicating that sales volume for previously owned single-family houses, condominiums and cooperatives hit a 10-year low in June.