Wall Street rallied to finish moderately higher Monday, as nervous investors got some reassurance from General Motors Corp.’s new labor agreement and a favorable court ruling for cigarette makers. Technology stocks rebounded ahead of three major profit reports.
GM’s tentative union deal calmed investors who feared worsening finances at the struggle automaker. The market also got a lift from strong quarterly earnings in the financial sector and the Supreme Court’s refusal to let the government pursue a $280 million penalty against tobacco firms.
The upbeat news helped offset rising crude oil, which added nearly $2 a barrel as a strengthening Tropical Storm Wilma posed yet another threat to the Gulf Coast region.
Ed Peters, chief investment officer at PanAgora Asset Management, said that while corporate earnings have so far been positive, high oil and gas prices and continued speculation about the Federal Reserve’s interest rate-tightening campaign have been holding back the market.
“I think there’s still uncertainty about how far the Fed is going to go, and uncertainty about the effect of higher energy prices on the economy,” Peters said. “We’re seeing a modest bounceback, but it doesn’t seem to have a lot of conviction.”
The Dow Jones industrial average finished a seesaw day up 60.76 points, or 0.6 percent, while the broader Standard & Poor’s 500-stock index was up 3.53 points, or 0.3 percent. The Nasdaq composite index, full of technology stocks, added 5.47 points, or 0.3 percent.
With little economic data due Monday, investors were relying on the first wave of third-quarter earnings reports as a gauge on the economy and Gulf Coast recovery efforts following hurricanes Katrina and Rita. Wall Street will pay particular attention to fourth-quarter and 2006 forecasts for further signs of recovery — or trouble.
Bill Strazzullo, chief market strategist at State Street Global Markets, said that as earnings and forward-looking guidance unfold, he’s looking for the S&P 500 to top 1,200 as an indication of whether Wall Street might see another rally.
“In the next week or so, we’re going to see how the fourth quarter is shaping up,” Strazzullo said. “I want to see the market show me it can gain traction above 1,200 again. I’d rather buy that strength than speculate now.”
General Motors jumped $2.11 to $30.69 after the company said it reached a deal with United Auto Workers to cut health care costs. However, the struggling automaker posted a $1.6 billion deficit for the third quarter, far greater than analysts had expected.
Wall Street has been worried about GM’s finances for months. In May, downgrades of the automaker’s debt rating and that of Ford Motor Co. sent an already shaky stock market even lower. The situation worsened this month when parts supplier Delphi Corp., a former GM unit, filed for bankruptcy.
Shares of tobacco companies surged on a Supreme Court ruling, with Phillip Morris USA parent Altria Group Inc. rising $4.30 to $74.96, and rival Reynolds American Inc. adding $5.06 to finish at $83.80.
In the financial sector, Citigroup saw a 35 percent jump in quarterly profit, due in part to the sale of its life insurance and annuities businesses. Without one-time charges, the company beat analysts’ estimates by 4 cents per share. Nonetheless, Citigroup gave back earlier gains and fell 23 cents to $44.81.
Wachovia Corp. rose 27 cents to $48.12 after the bank posted a 32 percent rise in earnings on strong revenue growth from lending and increased fees, as well as its recent acquisition of SouthTrust Corp.
Charles Schwab Corp. posted its largest quarterly profit since the dot-com era, reversing a year-ago loss on sturdy asset growth. The discount brokerage beat Wall Street targets by a penny per share. Schwab rose 21 cents to $13.34.
IBM released its earnings after the session, reporting a dip in net profit, and Intel and Motorola are set to report on Tuesday. IBM rose 24 cents to $82.59, Intel rose 23 cents to $23.46 and Motorola fell 22 cents to $19.94.
Overseas, Japan’s Nikkei stock average fell 0.15 percent. In Europe, Britain’s FTSE 100 was up 0.22 percent, Germany’s DAX index gained 0.07 percent, and France’s CAC-40 climbed 0.16 percent.