updated 8/26/2004 7:05:17 AM ET 2004-08-26T11:05:17

Stocks rallied in quiet trading Wednesday as oil prices fell for a fourth straight session, countering a pair of government reports that gave a mixed picture of the economy.

Major Market Indices

The moderate surge in buying was welcome on Wall Street, where investors have been in no hurry lately to commit new money to stocks. Many have stuck to the sidelines in the face of a long list of worries, including volatile oil prices and persistent terror fears. Contributing to the session’s light volume, a number of traders are preparing to take off ahead of the Republican convention in New York next week.

“All things being equal, if the price of oil continues to work its way lower, that will be very good for the market,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “It doesn’t mean the market will go straight up, but hopefully we’ve put in a bottom and we can now work higher.”

The Dow Jones industrial average ended up 83.11, or 0.8 percent, at 10,181.74.

The broader gauges also posted gains. The Nasdaq composite index rose 23.83, or 1.3 percent, to 1,860.72. The Standard & Poor’s 500 index finished up 8.77, or 0.8 percent, at 1,104.96.

Soaring fuel prices have pressured the market for weeks, with oil topping $49 per barrel last week, a record level. Prices have softened somewhat as anxiety about global supply eased, and a weekly government report showing higher-than-expected gasoline inventories sent them lower still Wednesday. Crude oil for October delivery dropped $1.74, or 3.9 percent, to $43.47 per barrel on the New York Mercantile Exchange. Gasoline futures tumbled 5 percent.

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Investors were also pleased by a Commerce Department report that said orders for costly manufactured goods rose by 1.7 percent in July, an encouraging sign that the economy is shaking off the summer doldrums. The best reading in four months for durable goods — big-ticket items expected to last at least three years — was boosted by demand for airplanes, machinery and communications equipment.

But the department found sales of new homes declined by 6.4 percent in July, a far steeper drop than analysts anticipated. The decline left home sales at their lowest level since December. Figures for June were also revised lower. Analysts said a challenging labor market and high fuel prices may be making people wary about purchasing a new home.

Aside from falling oil prices, there was little incentive for buying, making some analysts wonder whether the stock rally would hold. Many unknowns, including the outcome of the presidential race, continue to weigh heavily on investors.

“The fact that oil prices are falling off a bit is certainly helpful,” said Dave Legeay, director of portfolio management at McDonald Financial Group. “(But) fear that terrorism will disrupt supply is hanging over the market as a whole. Terrorism is also in play as we move forward to the election season.”

Among the beneficiaries of rising orders for big-ticket goods, Dow component Boeing Co. rose 3.1 percent, or $1.59, to $52.50, on news that Singapore Airlines had ordered up to 31 long-range Boeing 777-300 jetliners.

Toll Brothers Inc. shed 34 cents to $43.12, despite reporting a 56 percent surge in profits and raising its forecast for the year based on current demand and its backlog of orders for new luxury homes. Enthusiasm for the homebuilder, which surged in early trading, waned on the news about sliding home sales.

Williams-Sonoma Inc. rose 10 percent, or $3.14, to $34.64, after reporting a 55 percent jump in second-quarter profits on strong sales at Pottery Barn and its outlet stores. The home products retailer also raised its revenue estimates and reiterated its income guidance while elevating earnings, revenue and sales forecasts for the year.

Gap Inc. fell 40 cents to $19.52 after brokerage firm Merrill Lynch downgraded the retailer to “neutral” from “buy” on concerns about sluggish sales, which could continue to decline this fall amid pressure on consumer spending, a mediocre product line and the company’s decision to focus on young adults instead of back-to-school fashions. The firm’s analyst also lowered earnings-per-share estimates for the rest of this year and next.

Advancing shares outpaced decliners by 2 to 1 on the New York Stock Exchange. Preliminary consolidated volume came to 1.49 billion shares, up from 1.37 billion on Tuesday.

The Russell 2000 index, which tracks smaller company stocks, closed up 5.13, or 0.9 percent, at 550.14.

Overseas, Japan’s Nikkei stock average finished 1.3 percent higher Wednesday. In Europe, France’s CAC-40 added 0.02 percent, Britain’s FTSE 100 was up 0.1 percent and Germany’s DAX index gained 0.5 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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