Dow jumps as oil falls, dollar rises

By Tim Paradis, Associated Press

Originally published 09:45 a.m., May 12, 2008
Updated 01:02 p.m., May 12, 2008

NEW YORK — Wall Street rose sharply today as a rising dollar cooled some concerns about inflation and helped keep oil prices in check. The Dow Jones industrials at times gained more than 150 points.

The dollar’s advance against other major currencies appeared to help ease some concerns about inflation. A weak dollar can exacerbate price increases, especially since hard commodities like oil become more attractive to investors seeking a hedge against inflation.

The market’s unease about rising inflation and its effect on consumer spending receded somewhat as light, sweet crude wavered, falling $1.90 to $124.06 per barrel on the New York Mercantile Exchange. Oil briefly reached a new trading high of $126.40, but investors seemed shy, for the time being at least, to add to oil’s huge gain of nearly $10 last week. That advance added to concerns about rising prices and their effect on businesses and consumers. A major earthquake in China also stirred speculation that worldwide demand would fall.

The market also got some encouraging news about the credit crisis from London-based HSBC Holdings PLC, which said its first-quarter profits were up from a year ago although the global banking company took a $3.2 billion write-down on subprime mortgage assets in the United States. The company did echo other assessments that the U.S. was likely to fall into recession this year.

JPMorgan Chase & Co. CEO Jamie Dimon said at a conference today he estimates the credit market crisis is 75 percent over, but the recession is just beginning.

Today’s gains showed investors are still willing to lay some bets, although some market watchers said Wall Street will still likely see stocks fluctuate as investors try to determine the economy’s direction. Today’s advance follows a week in which the major indexes all fell as worries about the impact of inflation weighed on investors.

“This market does seem to be reacting positively to any sort of easing we see in the energy patch,” said Craig Peckham, market strategist at Jefferies & Co., noting that investors appeared somewhat relieved even on a day that brought a new high in currency.

He also contends that some of the buying is because of last week’s decline in which the Dow industrials lost 2.4 percent and the S&P 500 declined 1.81 percent.

“This market, after having had a pretty rough last week, is prone to drawing in some more value-seekers,” he said.

In midafternoon trading, the Dow rose 153.47, or 1.20 percent, to 12,899.35.

Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 14.17, or 1.02 percent, to 1,402.45, and the Nasdaq composite index rose 41.65, or 1.70 percent, to 2,487.17.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.76 percent from 3.78 percent late Friday. The dollar was higher against most other major currencies, while gold prices fell.

The flow of first-quarter earnings reports beginning to dwindle, so Wall Street will likely require some big news on the economy — such as a sharp reversal in commodities prices — to dislodge the markets from their current position, said Ted Oberhaus, director of equity trading at Lord, Abbett & Co. LLC.

“We’re the majority of the way through the earnings season and it has been relatively productive. With that as a backdrop, I would expect a range-driven appreciation over the next few months,” Oberhaus said.

In corporate news, MBIA Inc. posted a $2.41 billion first-quarter loss, as the struggling bond insurer took heavy charges to write down the value of liabilities amid continued deterioration in the credit markets. The stock rose 59 cents, or 6.3 percent, to $10.02 following comments from the company on the strength of its balance sheet.

Research In Motion Ltd. rose $9.55, or 7.2 percent, to $142.32 as the company introduced its first major new BlackBerry model in more than a year.

Investors will be looking to other readings on consumers this week to determine the toll rising energy costs might be having.

Government figures are due on retail sales in April. And retailers including Wal-Mart Stores Inc., Macy’s Inc., JCPenney Co. and Kohls Corp. are due to report first-quarter results.

Advancing issues outnumbered decliners by more than 2-to-1 on the New York Stock Exchange, where volume came to 691.5 million shares.

The Russell 2000 index of smaller companies rose 13.20, or 1.83 percent, to 733.25.

Overseas, Japan’s Nikkei stock average rose 0.64 percent.

Britain’s FTSE 100 rose 0.26 percent, Germany’s DAX index rose 0.47 percent, and France’s CAC-40 rose 0.32 percent.