Falling oil, rising stocks

NEW YORK (CNNMoney.com) -- The Nasdaq rose and the broader market edged higher Wednesday, as investors welcomed falling oil prices, upbeat earnings from Alcoa and a rally in the technology sector.

The Dow Jones industrial average (up 25.56 to 12,442.16, Charts) and the broader S&P 500 (up 2.74 to 1,414.85, Charts) index both gained around 0.2 percent. The Nasdaq (up 15.50 to 2,459.33, Charts) composite added 0.6 percent.

Video More video

Stocks had struggled through most of the session before finding momentum near the close.

Oil prices continued to erode - and continued to have a mixed impact on stocks. Lower oil and gas prices put more money into the hands of consumers, but also can hurt oil company profits.

Oil company profits have helped lead the recent earnings growth and the stocks have also played a big role in the broad market advance over the last few years.

"The talk of the week is definitely oil and other commodities," said Tom Schrader, managing director of U.S. equity trading at Legg Mason.

U.S. light crude oil prices for February delivery fell $1.62 to settle at $54.05 a barrel on the New York Mercantile Exchange, following a mixed weekly oil inventory report.

The nearly 3 percent decline sent oil stocks lower, with the Amex Oil (down 18.94 to 1,097.28, Charts) index losing 1.7 percent Wednesday.

Exxon Mobil (down $1.10 to $70.99, Charts), ConocoPhilips (down $1.98 to $64.53, Charts) and Valero Energy (down $0.73 to $48.21, Charts) were among the oil issues sliding.

Also weighing on oil stocks: Chevron (down $1.22 to $69.41, Charts) which warned Tuesday night that fourth-quarter financial results will be hurt by lower commodity prices.

Stock investors have also been a bit tentative this week ahead of the start of the first big wave of fourth-quarter earnings.

A few companies are due through the end of the week, but most of the S&P 500 won't report results until later in the month.

Standard & Poor's expects that fourth-quarter earnings for the S&P 500 grew 9.6 percent, a figure that is stronger than the historical average, but slower than in recent quarters. Since the first quarter of 2002, earnings have grown at least 10 percent in every quarter.

Alcoa (up $1.71 to $30.23, Charts) unofficially began the reporting period late Tuesday, becoming the first Dow component to release results, as is traditional. The aluminum maker reported quarterly earnings and sales that rose from a year earlier and topped estimates. The company's CEO also gave a bullish outlook for 2007.

Alcoa shares jumped 6 percent Wednesday and protected the Dow 30 from bigger losses.

Apple (up $4.43 to $97.00, Charts) continued to rally a day after announcing a new iPhone that allows users to play music and surf the Web on their cell phone.

Apple iPhone partners Yahoo! (up $1.12 to $28.70, Charts) and Google (up $3.96 to $489.46, Charts) also rose.

A variety of chip stocks rose, led by Intel (up $0.49 to $21.52, Charts), Altera (up $0.39 to $20.25, Charts) and Micron Technology (up $0.40 to $14.07, Charts).

Other stocks boosting the Nasdaq included rival satellite radio firms XM Satellite Radio (up $1.53 to $16.65, Charts) and Sirius Satellite Radio (up $0.27 to $3.98, Charts). Citigroup lifted its price target on XM, saying in a research note that the momentum behind a merger of the two is growing.

Airline stocks, which directly benefit from lower fuel costs, rose in response to the decline in oil prices.

The Amex Airline (Charts) index added 2.7 percent.

Also helping the sector: news that US Airways (up $1.03 to $58.93, Charts) has increased its takeover bid for bankrupt Delta Air Lines by almost 20 percent. (Full story).

Gold and other commodities continued to decline and that spread to the underlying stocks.

The Amex Gold Bugs (down $3.51 to $309.28, Charts) index lost 1.1 percent.

COMEX gold for February delivery fell $1.60 to settle at $613.40 an ounce.

Market breadth was positive. On the New York Stock Exchange, winners barely edged losers on volume of 1.56 billion shares. On the Nasdaq, advancers just edged decliners on volume of 2.30 billion shares.

Treasury prices slumped, boosting the yield on the benchmark 10-year note to 4.68 percent from 4.65 percent late Tuesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar gained versus the yen and euro.

10 big ideas for 2007

Danger ahead on Wall Street?

Private Equity in 2007

More on the markets