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| Playing oil stocks
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Earnings could fall dramatically if rising prices lead to reduced demand -- here's a way to cope. (Full story)
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| Prices, where to from here?
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NEW YORK (CNN/Money) -
Stocks got off to a slow start Monday but ended higher after a sharp drop in crude prices sparked an afternoon rally.
As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a flat opening for stocks Tuesday.
The Dow Jones industrial average (up 55.47 to 10,586.23, Charts) led advances, finishing the session higher 0.5 percent.
The Nasdaq composite (up 8.81 to 2,178.24, Charts) gained 0.4 percent, and the broader-based Standard & Poor's 500 (up 2.67 to 1,222.81, Charts) index added 0.2 percent.
Monday's rally marked the beginning of the third straight week of gains for the Dow and S&P 500 and fourth consecutive week of advances for the Nasdaq.
Treasury prices inched higher, lowering corresponding yields, while the dollar touched fresh highs against the euro and yen.
A string of buyback announcements helped the market get going early in the session. Wireless telecommunications firm Qualcomm (Research), aerospace and defense contractor Northrop Grumman (Research) and utilities company TXU Corp. (Research) all announced share buyback plans in the morning.
But that momentum faded and the gauges were relatively flat until a decline in crude prices fueled an afternoon rally. U.S. light crude oil for December delivery fell $1.11, or nearly 2 percent, to settle at $59.47 a barrel on the New York Mercantile Exchange.
Unseasonably warm weather in the Northeast has helped push down crude prices, as analysts expect to see demand for heating oil ease this winter. A survey released over the weekend showed prices at the pump are starting to ease as well.
"We haven't seen these (price) levels since mid-July. It looks like we've shaken off the supply shocks of the storms, and we're getting back to where prices ought to be," Jack Ablin, chief investment strategist with Harris Private Bank in Chicago, said.
Gainers on Monday's session included transportation stocks, with 18 of 20 of the components of the Dow Jones Transports Index finishing the session higher. Technology shares also put in a strong performance, with sector bellwether IBM (up $0.61 to $83.61, Research) posting gains.
After the close, Johnson & Johnson (Research) said it had been subpoenaed by the Massachusetts Attorney General regarding its sales and marketing of eight drugs to Omnicare (Research).
Aluminum products firm Novelis also said late Monday it would delay its third-quarter results and restate its first and second-quarter results. Novelis shares fell 58 percent in after-hours trading on the Inet electronic brokerage.
Looking ahead, Cablevision (up $0.16 to $25.56, Research) and Blockbuster (down $0.07 to $4.30, Research) are scheduled to report earnings before the market opens Tuesday.
There are no economic reports on tap Tuesday, but investors will be keeping their eyes on credit markets, said Hugh Johnson, chairman of asset management company Johnson Illington Advisors. Tuesday marks the beginning of a three-day $44 billion refunding of Treasury debt.
"There is that nagging underlying worry that interest rates are too high for stock prices, that the growth rate of earnings and the economy will not be strong enough to offset the rise in interest rates," Johnson said.
What moved?
Utilities company TXU Corp. (up $7.41 to $101.24, Research) jumped more than seven percent after it said it would buy back up to 34 million shares through the end of next year.
Among tech gainers, Microsoft (up $0.35 to $27.01, Research) rose 1.3 percent after the New York Times reported the software company is the leader in bidding for a stake in Time Warner's America Online unit.
The Wall Street Journal said that Yahoo! (up $0.03 to $37.90, Research) and Google (up $4.60 to $395.03, Research) are close to announcing new wireless services, sending shares of both companies higher.
TiVo (up $0.18 to $5.30, Research) shares jumped nearly four percent on reports that Yahoo! is close to announcing a partnership with the digital television recording company.
The drop in crude weighed on oil stocks, with the Amex Oil Index finishing the session down 1.7 percent.
Leading declines in the oil sector was natural gas producer El Paso (down $0.70 to $11.31, Research), which closed nearly six percent lower after it said its loss widened in the third quarter. The company also said natural gas output also fell due to the impact of hurricanes Katrina and Rita.
Shares of Williams (down $1.01 to $20.86, Research), another natural gas producer, fell more than four percent, while Frontier Oil Corp. (down $1.91 to $33.09, Research) declined lost more than five percent.
In major corporate news, medical device maker Guidant Corp. (down $1.40 to $57.52, Research) said the SEC had launched a formal inquiry into its product disclosures and said it was suing Johnson & Johnson (up $0.55 to $61.43, Research) to force J&J to complete its acquisition of the company.
Guidant's announcement dragged down healthcare stocks, including Molina Healthcare (down $1.47 to $26.02, Research), which fell five percent.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by a margin of about nine to seven on volume of 1.4 billion shares. On the Nasdaq, advancers also topped decliners four to three as 1.6 billion shares exchanged hands.
Treasury prices advanced, lowering the yield on the 10-year note to 4.63 percent from 4.66 percent late Friday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar hit a fresh 18-month high against the euro, and backed off a 26-month high against the yen.
COMEX gold gained $2.50 to $460.40 an ounce.
In global trade, major Asian markets ended lower, while European shares finished the day higher.
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