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msnbc.com
updated 8/17/2004 8:26:51 AM ET 2004-08-17T12:26:51

Oil prices retreating from record highs and upbeat outlooks from Wal-Mart Stores and Lowe’s triggered a round of bargain-hunting on Wall Street Monday, as investors snapped up stocks, driving the blue-chip Dow Jones industrial average, which hit a fresh 2004 low last week, up 129 points.

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“Oil for sure has been a key driver and any time we get a down move in oil that is positive [for the stock market],” said Tim Heekin, director of trading at San Francisco investment bank Thomas Weisel Partners.

Initial results early Monday showed Venezuelan President Hugo Chavez had survived a recall vote over the weekend, easing fears about a disruption to crude oil exports from the western hemisphere’s largest oil producer and removing one production uncertainty that has driven the price of crude to record highs in recent weeks.

A Chavez victory was expected, but opposition leaders claimed the same margin of victory as Chavez, saying the results were a fraud engineered through the use of electronic voting machines.

A barrel of light crude was lately quoted at $46 on the New York Mercantile Exchange (NYMEX), down from a record high of $46.91 a barrel hit earlier in the day — the highest level since the NYMEX launched oil futures 21 years ago.

A steady rise in oil prices has put pressure on the market in recent weeks as it pushed through new record highs, but the relief in prices Monday helped the stock market.

At Monday’s close, the Dow was up 129.20 points, or 1.3 percent, while the broader Standard & Poor’s 500-stock index rose 14.54 points, or 1.4 percent. The Nasdaq composite index, full of tech stocks, finished up 25.62 points, or 1.5 percent.

Fears that expensive crude oil may put at risk the U.S. economic recovery and crimp corporate profitability dragged the Dow to 9,815 last week, a new closing low for the year, while the Nasdaq composite index also slid to a new 2004 low.

Some analysts said Monday’s rally was a reaction in part to an oversold market, while others said it was driven in part by thin late-summer trading. Some professional investors like Barton Biggs, who manages a hedge fund portfolio for Morgan Stanley’s Traxis Partners, also expressed doubt about the sustainability of the day’s advance.

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“We’ve had these one-day wonder rallies before, so I don’t know if this is the real deal,” Biggs told CNBC. “We need two or three strong days with big upside volume; we need to see the normal indications that the market is not experiencing a short-term bounce, and we haven’t seen that yet,” he added.

In Monday’s company news, Time Warner’s share price rose 3.8 percent to $16.21 after business weekly Barron’s said the media and entertainment company still faces some formidable challenges, although a new management team led by Chief Executive Richard Parsons was laying the groundwork for a powerful revival.

Shares of Dow component Wal-Mart rose 1.7 percent to $54.30 after the company reported a weekly update that sales for August were in line with expectations so far, partly due to brisk business in the southeast as customers prepared for hurricane season.

Lowe’s, another retail giant, saw its share price rise 5.3 percent to $49.14 even though its earnings missed Wall Street estimates by 2 cents a share, largely because bad weather dented sales in June. The company reported a 17.9 percent increase in net income and raised its outlook for the current quarter.

Insurance shares were mixed as investors took stock of the impact of Hurricane Charley, which swept over southwest Florida on Friday. Shares of Florida insurer 21st Century Holding slid 7.3 percent to $18.30 after saying it will record a $1.25 per share charge against third-quarter earnings due to claims from Charley losses.

The market shrugged off a disappointing drop in the U.S. Empire State Manufacturing Index, a measure of industrial activity in the New York area, which showed its lowest reading since May 2003, and down from 35.6 in July. Any reading above zero means expansion in manufacturing has occurred.

Advancing shares outnumbered decliners by about 4 to 1 on the New York Stock Exchange. Volume came to 896.19 million shares, compared to 883.22 million traded at the same point Friday.

Overseas, Japan’s Nikkei stock average closed Monday down 0.7 percent. In Europe, Britain’s FTSE 100 closed up 1.1 percent, France’s CAC-40 climbed 0.9 percent for the session and Germany’s DAX index jumped 1.4 percent.

Reuters and the Associated Press contributed to this report.

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