Stocks Hold Some Gains As Rally Sputters

NEW YORK – An early rally sputtered but stocks held on to some of their gains Wednesday when rising oil prices deflated the market’s enthusiasm over strong earnings from technology bellwethers Hewlett-Packard Co. and Applied Materials Inc.

Despite the flagging rally, investor sentiment seemed to swing toward embracing good news as a buying opportunity, rather than selling on the news for a quick profit as was the case over the past few months. Tech stocks remained strongest, despite some analysts’ concerns over future sales and the industry’s tight profit margins.

Falling oil prices also helped the market overcome some of the inflation fears that have sent stocks skidding since mid-April, but a late rise in the price of benchmark crude sent some investors scurrying to sell again.

“We’ve had strong earnings and have seen oil prices come down a bit over the past few days,” said Peter Cardillo, chief strategist and senior vice president for S.W. Bach & Co. “But we need those trends to continue in order to sustain any kind of rally.”

In late afternoon trading, the Dow Jones industrial average gained 26.97, or 0.3 percent, to 9,995.48 after rising 61.60 on Tuesday. The Dow had been up 123.99 earlier in the session.

Broader stock indicators were sharply higher. The tech-focused Nasdaq composite index gained 13.91, or 0.7 percent, to 1,911.73, while the Standard & Poor’s 500 index was up 2.63, or 0.2 percent, at 1,094.12.

While closing at certain key levels – 10,000 for the Dow, 1,900 for the Nasdaq and 1,100 for the S&P 500 – would provide a psychological boost for investors, few market-moving catalysts remain now that earnings season is winding down.

“The markets will really be stuck in a range for a while,” said Russ Koesterich, U.S. equity strategist at State Street Corp. “I think you break of the range when you get some feeling from the Fed that they don’t see a problem with inflation. That could be a while – even after the elections.”

However, if the Federal Reserve raises benchmark interest rates in June, as is widely expected, the removal of uncertainty for the market could create a buying opportunity.

“If the Fed moves in June with a small rate hike and a very benign statement, and we see oil decline under $40 (per barrel), the combination of those two is going to be very powerful for the market,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “There’s money to be made between the first Fed rate hike and the election, even with some volatility that we’re sure to find there.”

Dow component Hewlett-Packard posted a 34 percent gain in quarterly profits after Monday’s session, matching Wall Street expectations. The computer maker, which boosted its sales outlook for the second half of the year despite intense competition, jumped $1.15 to $20.98.

Applied Materials climbed 12 cents to $18.97 after the chip manufacturing equipment maker announced an 82 percent surge in sales from a year ago. The company beat analysts’ estimates by 3 cents per share.

Losses were pared at Goodyear Tire & Rubber Co., which announced its fourth-quarter profits two months late due to accounting problems in its European divisions. Goodyear, which saw sales increase 11 percent, was up 47 cents at $8.63.

Bookseller Borders Group Inc. beat Wall Street estimates by 2 cents per share on a 10.6 increase in sales from a year ago. However, Prudential downgraded both Borders and rival Barnes & Noble Inc. due to concerns over the coming year’s sales outlook. Borders lost 25 cents to $22.45, while Barnes & Noble fell 61 cents to $28.47.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.16 billion shares, compared to 1.03 billion at the same point Tuesday.

The Russell 2000 index of smaller companies rose 1.07, or 0.2 percent, to 543.63.

Overseas, Japan’s Nikkei stock average rose 2.4 percent. Britain’s FTSE 100 closed up 1.2 percent, France’s CAC-40 gained 2.1 percent for the session and Germany’s DAX index rose 2.2 percent in late trading.

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