msnbc.com news services
updated 6/29/2005 7:21:11 AM ET 2005-06-29T11:21:11

Stocks roared back Tuesday, with the Dow Jones industrial average seeing its first positive close in seven sessions, as investors welcomed oil prices plunging more than $2 and consumer confidence surging to a three-year high.

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Investors bought up stocks as the price of crude oil, which had closed above $60 per barrel Monday for the first time, fell to $58 amid profit-taking following the recent run-up in prices. Light crude settled at $58.20, down $2.34 on the New York Mercantile Exchange.

In addition, the Conference Board’s consumer confidence index rose to its highest level since 2002 , and consumers’ optimism about the future also rose. That gave the market enough impetus to move higher, gaining back a little of the previous week’s oil-driven selling.

“The sell-off last week was a little much based on the underlying economic fundamentals,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “Companies were able to make plenty of money over the last two quarters when oil was in the mid-$50s, and consumers will continue to spend money at these levels. It was just over done, and we’re getting some of it back now.”

The Dow Jones industrial average was up 114.85 points, or 1.1 percent, at the close, while the broader Standard & Poor’s 500-stock index was up 10.88 points, or 0.9 percent. The technology-rich Nasdaq composite index jumped 24.69 points, or 1.2 percent.

The market’s upswing provided some stability going into Thursday, when the Federal Reserve will release its decision on interest rates less than two hours before the market closes and the second quarter ends. Investors hope the Fed will shed light on how long rates will continue to rise, as well as the impact of oil on the economy.

Analysts at Morgan Stanley raised its price target for crude oil to $50 per barrel in 2005 and 2006, up from a $43 per barrel projection earlier this year. The company also singled out a handful of companies as benefiting from the higher price of crude. Exxon Mobil Corp. fell 21 cents to $59.09, while ConocoPhillips gained $1.42 to $58.10; both were mentioned in the Morgan Stanley report.

Advanced Micro Devices Inc. rose $1.05 to $17.70 after the semiconductor maker sued rival Intel Corp. for antitrust violations. AMD claims Intel has a monopoly in computer processors and has forced customers into exclusive contracts to protect that monopoly. Intel added 47 cents to $26.33 on the news.

IBM Corp. announced late Monday that the Securities and Exchange Commission has launched an informal probe into how the company released data on its employee stock option accounting. IBM nonetheless climbed $1.42 to $75.30.

Sun Microsystems Inc. gained 5 cents to close at $3.74 after it announced it would buy business software maker SeeBeyond Technology Corp. for $387 million in cash, or $4.25 per share. SeeBeyond surged 30.8 percent, or $1.01, to $4.29.

Overseas, Japan’s Nikkei stock average rose 0.87 percent. In Europe, Britain’s FTSE 100 was up 0.9 percent, Germany’s DAX index gained 0.7 percent and France’s CAC-40 climbed 0.9 percent.

The Associated Press contributed to this report.

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