msnbc.com staff and news service reports
updated 10/28/2004 9:27:34 AM ET 2004-10-28T13:27:34

Stocks rebounded Wednesday, lifting the Dow Jones industrial average to its first close above the emotionally-key 10,000 level since Oct. 13, as investors expressed relief over plummeting oil prices following a government report that showed a build in crude inventories and lower-than-expected heating oil inventories.

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Investors welcomed the government’s weekly supply report, although it showed a slide in distillate products. Nonetheless, the resulting plunge in crude futures helped equities bounce back from a lackluster open. The question for stock investors, however, is whether oil prices will continue to fall.

“Oil has been the driving force behind the market for some time, but today oil prices are declining and that’s driving stocks higher,” said Kent Engelke, capital markets strategist at Anderson & Strudwick. “The report on inventories suggests things are not as bad as we thought, and so people are asking whether oil above $50 is really justified.”

Wall Street has grown increasingly anxious about how soaring energy costs might dent consumer spending ahead of what’s expected to be a chillier than normal winter.

With oil prices hovering near the $55-per-barrel level for several days, OPEC urged the Bush administration to release more oil from the U.S. strategic reserve to calm the market. But after the release of the inventory data, light, sweet crude for December delivery skidded $2.71 to $52.46 on the New York Mercantile Exchange.

Stock indices rallied in response, with the Dow Jones industrial average posting its second straight triple-digit gain, jumping 113.55 points, or 1.2 percent. It was the first time since May 9 and May 12, 2003 that the blue-chip index has gained more than 100 points in two consecutive sessions

The broader Standard & Poor’s 500-stock index finished with a gain of 14.31 points, or 1.3 percent, while the tech-loaded Nasdaq composite index rallied 41.20 points, or 2.1 percent.

A jump in orders for big-ticket items offered further encouragement. The Commerce Department said orders to U.S. factories for durable goods — items expected to last three or more years — rose 0.2 percent in September, propelled by higher demand for communications equipment. That followed a decline of 0.6 percent in August.

Excluding the volatile transportation sector, orders were up a stronger 1.7 percent last month following a 2.8 percent increase in August.

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In Wednesday’s other economic news, the U.S. Federal Reserve reported that the economy continued to expand in September and early this month, despite rising energy costs and uncertainty surrounding the presidential election. And the Commerce Department said new home sales rose 3.5 percent in September — a better-than-expected showing.

Analysts welcomed the two-day pop in share prices, saying it was partly the product of oversold conditions. Anxiety over lofty oil prices, rising interest rates, decelerating corporate earnings and fear that the upcoming presidential race could be targeted by terrorists, or might not result in a clear winner, have weighed heavily on the markets in recent weeks.

“It’s nice to see some more volume coming back into the market, which indicates people are willing to make some commitments and look past some of the shorter-term issues we see, including in earnings and guidance,” said Jack Caffrey, equity strategist for J.P. Morgan’s private bank. “Earnings have been OK this quarter, a little better than expected, but not quite as much better as we’d gotten used to. The [year-over-year] comparisons are getting tougher ... and you’re seeing a larger percentage of companies missing expectations.”

Among Dow components reporting results, Boeing Co. was up 12 cents at $50.10 after the aerospace giant beat Wall Street expectations with a 78 percent jump in third-quarter earnings. And Procter & Gamble Co. shed $1.43, or 2.69 percent, to $51.78, despite reporting a 14 percent rise in profits.

ATA Holdings Corp., the parent company the nation’s 10th-largest air carrier, was up 27 cents, or 29 percent, at $1.20, after filing for bankruptcy protection and selling off airport slots and other assets to AirTran Airways Inc. for $87.6 million. AirTran was up $1.39, or 13.6 percent, at $11.64.

Overseas, Japan’s Nikkei average added 0.18 percent. In Europe, France’s CAC-40 surged 1.63 percent, Britain’s FTSE 100 added 1.02 percent and Germany’s DAX rose 1.73 percent.

The Associated Press contributed to this report.

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