updated 6/2/2004 9:37:48 AM ET 2004-06-02T13:37:48

A change of heart gave Wall Street a late-day rally Tuesday, as strong economic data overcame investors’ anxiety over a surge in oil prices.

Major Market Indices

An attack on foreign oil workers in Saudi Arabia, which left 22 people dead, sent benchmark crude oil prices climbing $2.42 to a record $42.30 per barrel on the New York Mercantile Exchange. The jump in turn raised stock investors’ worries about the impact of rising energy prices on inflation and the Federal Reserve’s interest rate policy.

However, a higher-than-expected rise in construction spending and strong growth in the manufacturing sector showed that the potential for higher rates would not harm two of the major engines of the economy — a major concern of investors. Those bullish figures kept stocks from plunging and let buyers re-enter the market late in the session. Light volume after the holiday weekend helped keep volatility low as well.

“It’s all about oil right now because of the terror attack in Saudi Arabia,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “Actually, though, the market’s hung in there pretty well. I think that the attack happened there instead of here helped ease some fears.”

The Dow Jones industrial average was up 14.20 points, or 0.1 percent, at 10,202.65 by Tuesday's close, while the broader Standard & Poor’s 500-stock index was up 0.52 point, or nearly flat at 1,121.20. The Nasdaq composite index rose 4.03 points, or 0.2 percent, to close at 1,990.77.

Stocks were coming off solid gains last week, the first major up week on Wall Street in more than a month. However, many investors held off making large bets until Friday’s monthly payroll report — a major gauge of the economy’s strength — was released.

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Tuesday’s economic indicators revealed a growing economy. Construction spending rose 1.3 percent in April, the best month ever, while the Institute of Supply Management’s index of manufacturing activity rose to 62.8 in May, up from 62.4 in April. Both figures were better than economists expected, but did little to move stocks until investors had second thoughts late in the session.

Analysts were not impressed by the market’s behavior, however.

“We don’t really have a huge direction here,” said Bill Groenveld, head trader for vFinance Investments. “The economic numbers were good, but that did nothing. Maybe it’ll pick up for the employment numbers on Friday.”

Viacom Inc. fell 46 cents to $36.81 after president and chief operating officer Mel Karmazin unexpectedly resigned. MTV chief Tom Freston and CBS executive Leslie Moonves will share the company’s No. 2 post.

Medtronic Inc. and Genzyme Corp. have formed a joint venture to develop new drugs for heart disease, including treatments to repair damaged heart tissue. Medtronic climbed 95 cents to $48.85, while Genzyme was down 11 cents at $43.74.

Boston Scientific Corp. gained $1.30 to $45.60 after its announced the acquisition of privately held Advanced Bionics Corp. for $740 million, giving the company a stronger presence in implanted microelectronic devices.

Labor Ready Inc. surged $1.68 to $13.85 after raising its second-quarter earnings estimates. The temporary labor agency said it had better-than-expected sales in April and May.

Oracle Corp. fell 28 cents to $11.12 after a downgrade from Prudential, from overweight to neutral.

Declining issues were nearly even with advancers on the New York Stock Exchange, where volume came to 1.23 billion shares, compared with 1.17 billion on Friday. The Russell 2000 index of smaller companies was up 4.23 points, or 0.7 percent, at 572.51.

Overseas, Japan’s Nikkei stock average rose 0.5 percent. In afternoon trading, Britain’s FTSE 100 closed down 0.2 percent, France’s CAC-40 was off 1.2 percent for the session and Germany’s DAX index dropped 1.5 percent.

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