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NEW YORK (CNN/Money) -
Stocks surged Thursday, recharging the recent rally as falling bond yields, lower oil prices and a narrower-than-expected October Treasury deficit sparked an advance.
As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a flat open for stocks Friday, when fair value is taken into account.
Friday is likely to be a lightly traded session, with bond markets closed in honor of Veteran's Day.
The Dow Jones industrial average (up 93.89 to 10,640.10, Charts) rose 0.9 percent and the S&P 500 (up 10.31 to 1,230.96, Charts) index added nearly 0.9 percent.
The Nasdaq composite (up 20.87 to 2,196.68, Charts) added almost 1 percent.
Treasury bond prices surged, lowering the corresponding yields, and the dollar went higher versus other major currencies.
"There's been this tug of war all day between factors like falling oil prices, more negative than positive economic news and everything going on at GM," said Art Hogan, market analyst at Jefferies & Co.
"The better-than-expected budget statement that came out at around two o'clock may have helped tip it to the positive," he added.
The federal budget deficit narrowed to $47.2 billion in October from $57.3 billion in September, the Treasury Department reported Thursday afternoon. Economists surveyed by Briefing.com thought it would narrow to $50 billion, on average.
Treasury bonds rallied, building on morning gains, in response to both the budget report and stronger-than-expected international demand for the afternoon's $13 billion 10-year note auction.
The bond rally lowered the yield on the 10-year note to 4.56 percent from 4.65 percent late Wednesday. Bond prices and yields move in opposite directions.
U.S. light crude oil for December delivery tumbled $1.13 to settle at $57.80 a barrel on the New York Mercantile Exchange, a decline of nearly 2 percent. That was good news for the market, although not for oil stocks.
After the close, Dell (Research) reported third-quarter earnings that were in line with recently lowered estimates. However, the company also issued a fourth-quarter earnings and revenue forecast that sets the midpoint below analysts' current estimates. Shares fell less than one percent in extended-hours trading.
What moved?
The rally was broad based, with all but two of the 30 components that make up the Dow industrials gaining.
General Electric (up $0.58 to $34.50, Research), Citigroup (up $0.91 to $47.73, Research), Home Depot (up $0.93 to $41.74, Research), IBM (up $1.15 to $83.99, Research) and Boeing (up $1.39 to $66.10, Research) were the biggest advancers.
The two decliners were GM and Exxon Mobil.
General Motors (down $1.12 to $23.51, Research), whose accounting is being investigated by the SEC, said late Monday that it overstated earnings for 2001. The automaker cited errors in the way it accounted for credits from suppliers.
GM stock lost 4.6 percent, recovering from a 7 percent decline in the morning.
Exxon's decline was tied to the sell-off in the oil sector.
Intel (up $0.44 to $25.24, Research) said Thursday that its board has approved a 25 percent boost to its quarterly dividend starting in the first quarter of 2006.
The leading chipmaker also said its board had approved buying back up to $25 billion in outstanding shares as part of its ongoing stock repurchase program. Shares rose 1.8 percent and helped boost the broader chip sector.
Cisco Systems (down $0.60 to $17.15, Research) issued fiscal second-quarter revenue guidance late Wednesday that fell short of estimates. The outlook overshadowed the company's higher-than-expected quarterly earnings report.
Cisco shares sank 3.4 percent. Other network and telecom stocks had fallen in tandem in the morning but managed to trim losses in late trade.
A slew of homebuilders jumped, recovering from days of selling after Toll Brothers (Research) offered a bearish outlook on sales and demand earlier in the week.
The Dow Jones Home Construction (up $29.77 to $876.12, Research) index added 3.4 percent.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than nine to seven on volume of 1.75 billion shares. On the Nasdaq, advancers beat decliners by nearly three to two on volume of 1.98 billion shares.
Oil stocks slide
While the slide in oil prices was helpful to market sentiment Thursday, it was not helpful for oil stocks, which slumped. Oil stocks have been among the best performers in 2005, and a sell-off in the sector tends to drag on the overall market.
The Amex Oil (down 32.97 to 944.79, Charts) index lost 3.4 percent, with all 12 of its components dragging. Marathon Oil (down $2.87 to $56.33, Research) and Amerada Hess (down $5.94 to $122.06, Research) were the biggest decliners.
The Philadelphia Oil Service (Charts) index slid 3.9 percent, with all of its 15 components falling. National Oilwell Varco (down $3.34 to $55.43, Research) and Rowan Companies (down $2.32 to $33.13, Research) were the biggest losers.
Crude oil prices have fallen over 18 percent since hitting a record trading high above $70 a barrel in August. Over the last week, the price of crude has dropped 6 percent.
In the same time, the Amex Oil index fell 8 percent and the Philly Oil index 7 percent, with traders perhaps betting that oil has not only peaked, but that oil stocks have too.
Oil stocks will likely slide another 10 or 15 percent through the end of the year, said Gene Gillespie, senior analyst at energy trading firm Howard Weil.
Within the broader sector, "companies that are producing and selling the product are the most vulnerable," Gillespie said. "The oil service group is less vulnerable, because there is increasing pressure to spend more for the resources."
Trade gap jumps, sentiment recovers
A morning report showed that the U.S. trade gap soared to a record $66.1 billion in September, well above forecasts.
A separate report showed a larger-than-expected rise in jobless claims last week.
On the upside, the University of Michigan's consumer sentiment index rose to 79.9 in early November from 74.2 in October, Reuters reported. That beat forecasts for a rise to 76.
The dollar gained versus other currencies, remaining near two-year highs against the euro and yen.
COMEX gold rose 20 cents to settle at $467.70 an ounce.
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