Stock gains powered by lower oil
Wall Street manages to break the 2-session losing streak, thanks to falling crude prices and strength in commodities.
NEW YORK (CNNMoney.com) -- Lower oil prices helped fire up a stock market advance Thursday, as investors looked beyond the morning's big spike in consumer inflation and opted to scoop up shares hit in the recent retreat.
The Dow Jones industrial average (INDU) added 0.7%, while the broader Standard & Poor's 500 (SPX) index added 0.6%. The Nasdaq composite (COMP) gained 1%.
Stocks tumbled Tuesday and Wednesday on a mix of higher oil prices and more financial market malaise. That initially spilled into Thursday morning trading, as investors considered a spike in consumer inflation and Wal-Mart's mixed outlook.
But the consumer spending worries were set aside as investors picked up some of the stocks hit hardest in the previous 2 down sessions, including financial shares, automakers and retailers. Sliding oil prices added to the day's advance.
"I guess the perception is that the inflation report is backwards looking, and with the correction in commodities we've seen recently, the next report will show improvement," said Michael Church, senior portfolio manager at Church Capital.
Church says he thinks it is too early to conclude that commodity prices are going to correct a lot more, but for the moment that expectation seems to be helping investors.
"Certainly the drop in oil has been very significant," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
Since peaking at more than $147 per barrel in mid-July, oil prices have dropped around 22%.
Investors also have been getting a leg up from a recovering greenback. "Largely, you have the dollar rally powering the markets forward," Church said.
Additionally, Thursday's trade was continuing a pattern that's been in play since the stock market hit what was likely a bottom in mid-July, Detrick said. Since that time, investors have largely been willing to digest the session's negative news quickly and then step in to buy selectively.
Friday brings reports on manufacturing and consumer sentiment. Earnings reports are due from retailers J.C. Penney (JCP, Fortune 500) and Abercrombie & Fitch (ANF).
Fuel prices: U.S. light crude oil for September delivery fell 99 cents to settle at $115.01 a barrel on the New York Mercantile Exchange, due to bets that a slowing U.S. economy will drive down oil prices.
Retail gas prices dropped overnight, extending a downward trend for a 28th day, according to a survey of gas station credit-card activity. (Full story.)
On the move: Gains were broad based, with 26 of 30 Dow components advancing.
AIG (AIG, Fortune 500), American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500), General Motors (GM, Fortune 500), Home Depot (HD, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) were the Dow's biggest gainers.
JPMorgan Chase and Morgan Stanley agreed to buy back $7 billion in auction-rate securities as part of a settlement with regulators. The companies will also pay a combined $60 million in fines.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by nearly 2 to 1 on volume of 1.01 billion shares. On the Nasdaq, advancers topped decliners 3 to 2 on volume of 1.89 billion shares.
CPI: The July Consumer Price Index jumped at a 5.6% annual rate, touching a 17-year high. CPI jumped 0.8% vs. June levels, double analysts' forecasts, as inflationary pressure continued to amp up.
The so-called core CPI, which strips out volatile food and energy prices, rose 2.5% vs. a year ago and 0.3% vs. June. Both numbers were above economists' expectations. (Full story.)
Wal-Mart Stores: The world's largest retailer reported higher quarterly earnings and sales, thanks to the government stimulus payments and shoppers' need to find deals amid the sluggish economy. Earnings topped estimates, while sales missed forecasts.
But with the stimulus impact petering out, Wal-Mart forecast that current-quarter earnings could miss analysts' estimates. The company also forecast full-year earnings in a range that sets the midpoint below analysts' forecasts. Wal-Mart (WMT, Fortune 500) shares tiptoed higher. (Full story.)
Jobless claims: The number of Americans filing new claims for unemployment last week dropped from 6-year highs reached the week before. However, the decline was smaller than what economists were expecting. (Full story.)
Housing: July foreclosure filings jumped 8% from June and 55% from a year ago, according to a report released Thursday by RealtyTrac, an online seller of foreclosed homes. Banks took back 77,295 homes in the month, a 138% jump from a year ago. (Full story.)
A separate report showed a 7.6% year-over-year drop in the median single-family existing-home price. (Full story.)
In other housing news, former Federal Reserve Chairman Alan Greenspan said that the market could bottom in 2009. (Full story.)
Other markets: In the bond market, Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.89% from 3.93% late Wednesday.
In currency trading, the dollar gained against the euro and the yen.
COMEX gold for October delivery fell $16.90 to settle at $810.70 an ounce. 
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