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Shares Mixed As Investors Mull Oil Prices

Posted on: Wednesday, 4 August 2004, 06:00 CDT

NEW YORK - Stocks rallied in afternoon trading Wednesday, but remained mixed as investors wrestled with concerns that surging crude oil prices would pose an inflationary threat.

Investors were cheered as oil prices moved off their early highs. A barrel of light sweet crude was quoted at $43.25, down 90 cents, on the New York Mercantile Exchange after climbing to $44.34 early in the session.

Wall Street also received a boost from two key economic reports. Factory orders rose 0.7 percent in June, more than than Wall Street expected. And the Institute of Supply Management's service sector index for June rose more than economists had forecast.

Despite the mixed trading, analysts were pleased with the market's tone.

"Yes, we have oil prices rising, but I think overall, we're starting to see some settling down in the market," said Bill Groenveld, head trader for vFinance Investments. "All the unknowns that drove the market down in July are starting to pan themselves out. There may be a malaise in the marketplace for a while, but it's better than uncertainty."

In midafternoon trading, the Dow Jones industrial average gained 17.33, or 0.2 percent, to 10,137.57.

Broader stock indicators were modestly lower. The Standard & Poor's 500 index was down 0.24, or 0.02 percent, at 1,099.45, and the Nasdaq composite index dropped 2.65, or 0.1 percent, to 1,856.77.

The high oil prices remain a concern, since higher fuel costs could trickle down to the consumer as food producers and major retailers will pay a higher cost in shipping.

"The overseas markets were hit hard, and that was all oil," said Neil Massa, an equity trader at John Hancock Funds. "Combine that with a slowdown in consumer spending, that makes it very hard for anyone to get into the market right now."

But Wednesday's economic figures were an encouraging sign that June's economic "soft spot" may not have lasted. Factory orders for June were higher than the 0.4 rise in May. And orders for durable goods rose 0.9 percent in June, up from a 0.9 percent decline in May, the Commerce Department said.

A key test for the economy - and the markets - will come Friday as the government releases the latest data on job creation. Next Tuesday's Federal Reserve meeting will also be closely watched for signs that the Fed might back off on raising interest rates too aggressively.

In the meantime, technology shared suffered as telecom company Ciena Corp. warned that sales would slump significantly in the third quarter. Ciena fell 65 cents, or 24 percent, to $2.11.

Prudential Financial Corp., whose headquarters was named in this week's terror alert as a possible target, gained 22 cents to $45.98 as it reported a four-fold increase in quarterly earnings. The financial company posted earnings that were 19 cents a share more than expected.

CVS Corp. beat Wall Street estimates by 2 cents per share in its latest earnings statement, reporting a 17 percent rise in profits. The pharmacy chain was down 78 cents at $40.99.

Insurer Cigna Corp. fell $1.16 to $61.42 despite beating estimates by an impressive 50 cents per share. The company swung to a profit from a year-ago loss and boosted its earings outlook as well.

Clothiers Polo Ralph Lauren and Tommy Hilfiger both managed to surpass expectations, with Polo Ralph Lauren doubling its profits on the strength of its women's line, and Hilfiger posting a less-than-expected loss due to slumping wholesale revenues. Polo Ralph Lauren rose 99 cents to $34.11, while Hilfiger was up 30 cents at $13.59.

Declining issues outnumbered advancers by more than 8 to 5 on the New York Stock Exchange, where volume came to 827.84 million shares, compared with 814.81 million at the same point Tuesday.

The Russell 2000 index of smaller companies was down 1.77, or 0.3 percent, at 541.86.

Overseas, Japan's Nikkei stock average fell 1.2 percent. In Europe, Britain's FTSE 100 closed down 0.5 percent, France's CAC-40 dropped 1.2 percent for the session and Germany's DAX index tumbled 1.4 percent in late trading.

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