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msnbc.com
updated 12/2/2004 8:12:38 AM ET 2004-12-02T13:12:38

Wall Street’s main stock indices soared Wednesday, with the Dow Jones industrial average posting a triple-digit gain, as a large buildup in the nation’s energy inventories and data showing increased consumer spending got the month of December off to a strong start.

Major Market Indices

The main catalyst for the stock surge, which drove the broader market to a multi-year high, was a report on U.S. oil inventories released in morning trading. It showed U.S. reserves of distillate products like heating oil and other derivative products rose by 2.3 million barrels in the latest week, far higher than Wall Street had expected.

The report also showed gasoline and crude oil inventories rose substantially. That news drove the price of crude oil down nearly $4 on the New York Mercantile Exchange Wednesday — the biggest one-day drop in crude oil prices in over three years.

Stock prices rallied as crude prices plunged. By the close of trading, the Dow Jones industrial average was up 162.20 points, or 1.6 percent, at 10,590.22, while the broader Standard & Poor’s 500-stock index jumped 17.55 points, or 1.5 percent, to 1191.37. The technology-rich Nasdaq composite index surged 41.42 points, or 2 percent, to close at 2138.23.

The Nasdaq’s close was its highest since January. The S&P 500 finished at its highest level in three and a half years, while the blue-chip Dow closed at its highest level since March.

“Oil futures go down, stocks go up. I think that’ll be a pattern for a long time, and the good news is that if we keep getting inventory reports like this, oil prices will be ready for a big correction downward,” said Brian Belski, Piper Jaffray’s market strategist. “Overall, this market has clearly turned to growth mode over the past few months and should continue to grow.”

Peter Cardillo, chief strategist at New York brokerage S.W. Bach, noted that technology giant Microsoft’s planned payment of a special dividend, worth $32 billion in total, to shareholders Thursday may fuel further gains on Wall Street this week. (MSNBC is a Microsoft-NBC joint venture.)

“That money is likely to seek a home in equities, so I think the dividend payment will be extremely positive for the market and could help us to move higher by the end of the year,” he said.

The good news about oil built on upbeat economic data released early in the session, including a Commerce Department report that showed a better-than-expected rise in consumer spending in October, which was welcome news after a mediocre start to the holiday shopping season.

“The personal income and spending numbers were very solid across the board, and we’ve been looking for these kinds of numbers for some time. It’s nice to see them right around the holiday season,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland.

Easing worries about the impact of higher oil on corporate profits and consumer spending boosted shares of firms most sensitive to higher energy costs, including manufacturing firms like United Technologies, which saw its share price rise almost 3 percent, but shares of oil-related firms, like ExxonMobil, slipped.

Another boost for the manufacturing sector came from the latest reading of the Institute for Supply Management’s manufacturing index for November, which measures the nation’s industrial activity. The index came in at 57.8, up from 56.8 in October and better than the 57 reading Wall Street expected. November marked the 18th straight month of growth for industrial activity.

The U.S. dollar was again a concern, but was generally overlooked by investors in favor of the strong economic data. The dollar fell to a 12-year low against the British pound, while the euro continued its record-setting gains against the greenback.

Merger activity dominated company news, with Wellpoint Health Networks Inc. successfully completing its $16.5 billion merger with Anthem Inc., creating the nation’s largest health insurer. Shares of the merged company, which will go by the name Wellpoint and trade under the ticker symbol WLP, rose 7.7 percent.

And Blockbuster’s stock price rose 5.3 percent after it said it was willing to raise its takeover bid for rival video rental chain Hollywood Entertainment above its original $11.50 per share offer. Hollywood’s stock price gained 1.9 percent on the news.

Stock indices sagged Tuesday, as investors reacted to news of sliding U.S. consumer confidence, but Wall Street’s main stock indices ended November with their best monthly performance so far this year.

Overseas, Japan’s Nikkei stock average fell 1.1 percent Wednesday. In Europe, Britain’s FTSE 100 closed up 0.7 percent, France’s CAC-40 climbed 1.1 percent for the session and Germany’s DAX index gained 1.5 percent.

Reuters and the Associated Press contributed to this report.

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