An afternoon rally spurred by a drop in crude oil prices pushed stock prices higher Monday, bringing investors back into the market despite lingering concerns over the strength of the U.S. dollar and the nation’s trade deficit.
Trading opened lower on fears that the economy could slow down further, spurred by Federal Reserve Chairman Alan Greenspan’s warnings Friday that the U.S. budget deficit and trade deficit were causing undue pressure on the U.S. dollar and the economy.
Those concerns weighed heavily on Wall Street Friday, prompting a 115-point drop in the Dow Jones industrial average.
Yet investors were cheered Monday afternoon as oil prices fell slightly, and used the dip as an excuse to continue buying stocks, analysts said. A barrel of light crude settled at $48.64, down 25 cents on the New York Mercantile Exchange.
“I think this is a market that really wants to go up,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “Yes, we’re worried about the dollar, but it was down for weeks and nobody paid attention until Greenspan said something. There’s still enough out there to remain positive about, and I think we’ll come out of this week and move higher through December.”
The Dow industrials were up 32.51 points, or 0.31 percent, at 10,489.42 by Monday’s close, while the broader Standard & Poor’s 500-stock index was up 6.90 points, or 0.59 percent, at 1,177.24, and the Nasdaq composite index, full of technology stocks, finished up 14.56 points, or 0.7 percent, at 2,085.19.
Prompted by Greenspan’s comments last week, investors worried that a free-falling dollar, which has been regularly setting record lows in recent weeks, could harm the inflow of foreign investment into U.S. stocks and bonds. The dollar was little changed against the euro and the Japanese yen, remaining near its historic lows.
“There’s a lot of macroeconomic issues around that aren’t going to be easily resolved, and that has investors’ attention,” said Jay Suskind, head trader at Ryan Beck & Co. “It’s not really a sense of uneasiness, but more that there are some headwinds out there to continued growth.”
However, Thanksgiving week has traditionally been a strong time for stocks, despite light volume, and analysts noted that many mutual funds end their fiscal years on Nov. 30 — prompting many money managers to buy up stocks in the hopes of bolstering their yearly returns.
Oracle Corp. slipped 7 cents to $12.68 after 61 percent of PeopleSoft Inc. shareholders agreed to Oracle’s $24 per share takeover bid. However, PeopleSoft’s board said the offer remains inadequate, setting the stage for a bruising takeover battle. PeopleSoft rose 19 cents to $23.36.
The board of Mylan Labs Inc. rejected investor Carl Icahn’s $5.4 billion offer to purchase the company, calling it a “self-serving” effort to intimidate the generic drug maker as it prepares to purchase rival King Pharmaceuticals Inc. Mylan skidded 23 cents to $18.65 while King climbed 14 cents to $11.29.
Google Inc. fell $4.30 to $165.10 as the company’s founders and top executives filed plans to sell 16.6 million shares over the next 18 months, unnerving investors who fear such an influx of stock could drive share prices lower.
Krispy Kreme Doughnuts Inc. swung to a loss in the third quarter, though it managed an operating profit of 4 cents per share excluding one-time costs. Wall Street had expected earnings of 13 cents per share on heavily reduced expectations. Krispy Kreme was down $1.86, or 16.2 percent, at $9.64.
Struggling toy retailer Toys R Us Inc. gained 42 cents to $19.78 after the company posted a better-than-expected loss. While sales continued to fall, the company mitigated its losses through the sale of its real estate.
Overseas, Japan’s Nikkei stock average tumbled 2.11 percent. In Europe, Britain’s FTSE 100 closed down 0.58 percent, France’s CAC-40 dropped 0.65 percent for the session and Germany’s DAX index fell 0.26 percent.