NEW YORK (AFX) -- U.S. stocks moved higher Wednesday as blue chips erased
early weakness, and the Nasdaq extended gains, after oil prices retreated
following a surprise rise in crude supplies for the latest week.
Supply concerns eased after the Energy Department said crude stocks were up 3.4
million barrels at 272.9 million barrels for the week ended Sept. 24. Many
analysts expected a decline in stocks. Gasoline stocks however fell by 900,000
barrels to total 198.8 million barrels.
The Dow Jones Industrial Average was last up 10 points at 10,088, off an early
low of 10,050.56.
Gains for Intel , Alcoa and Caterpillar offset a more-than 2 percent fall
for Boeing after Bank of America downgraded the stock on oil price concerns and
a worsening U.S. and European airline news flow.
The Nasdaq Composite Index rose 18.4 points, or 1 percent, to 1,888. Helping
the tech-rich index was strength in the Internet sector . Earlier, online
travel site Orbitz agreed to be bought by Cendant for $1.25 billion in cash.
A rally in semiconductor stocks was further underpinning gains.
The S&P 500 was off 1.75 points, at 1,108.31 while the Russell 2000 index of
small-cap stocks was up 0.3 percent.
Ahead of the market open, investors received a welcome surprise after
second-quarter U.S. growth was revised higher to a 3.3 percent annual rate from
the 2.8 percent previously reported, the Commerce Department said Wednesday.
Economists had been expecting a small upward revision to 3.1 percent annualized
from 2.8 percent, according to a survey of 37 economists conducted by CBS
MarketWatch.
Perhaps, more importantly, the report's key inflation measures were left
unrevised, showing that growth in the quarter did not fuel any rise in prices.
"The GDP numbers were a pleasant surprise, being revised up to 3.3 percent,
without any ramp-up in the inflation part of the report," said Barry Hyman,
equity market strategist at Ehrenkrantz King Nussbaum.
Hyman however said the better-than-expected reading was due in part to a
build-up in inventories. "But if that inventory doesn't translate into sales,
you have a problem."
Hyman said the market will continue to be buffeted by the price of oil. "But
it's the end of the quarter and that will play into today's behavior. I'd say
the market is going to react to these GDP numbers and take some of the growth
stocks up with it."
U.S. Treasury prices extended their losses after the GDP data. The benchmark
10-year Treasury note declined 14/32 to 101 18/32. Its yield , used in setting
corporate and mortgage lending rates, climbed to 4.06 percent.
The dollar traded was virtually flat against the euro and lower against the
Japanese yen as traders assessed the impact of the latest GDP report on future
interest rate hikes.
Gold futures edged higher, set to mark a third-straight session of gains with
weakness in the U.S. dollar fueling investment demand.
Crude-oil futures retreated Wednesday in New York trading as the latest supply
report confounded analysts, with the Energy Department reporting a rise in crude
stocks.
Many analysts expect a sizable drop in supplies following hurricane disruptions
to output and shipments in the Gulf of Mexico.
Oil for November delivery was last down 70 cents, at $49.20 after climbing to a
historic high of $50.47 in the prior session.
Turning back to the broader market for equities, advancers had a slight 15 to 13
edge over decliners on the New York Stock Exchange, while gainers outpaced
fallers by a 16 to 9 score on the Nasdaq.
Volume was 364 million on the Big Board, and 521 million on the Nasdaq.
Cendant to buy Orbitz for $1.2 billion
Merger and acquisition activity focused investor attention in early trading.
Shares of Orbitz rocketed 31 percent to $27.22 after the online travel site
agreed to be purchased by Cendant for $27.50 per share, or $1.25 billion in
cash.
Other online travel stocks rallied on the news. Priceline.com was up xxx, at
xxx, InterActive Corp , which operates Expedia and Hotwire, gained xx percent,
to xx while Sabre Holdings , the owner of Travelocity, rose xx percent, to xxx.
In a widely-flagged deal, ConocoPhillips announced a $2 billion investment for
a 7.6 percent stake in Lukoil, the second largest oil and gas group in Russia.
Both companies have agreed that the U.S. oil group can raise its stake in Lukoil
to as much as 20 percent. Shares of ConocoPhillips were last down 0.4 percent.
In other news, Computer Associates said it would reduce its workforce by 800
employees, or 5 percent, as part of a restructuring aimed at improving
efficiency and competitiveness.
The company expects to record charges of $40 million, or 4 cents a share related
to severance and benefit payments, with most to be recorded in its fiscal second
quarter.
The plan is expected to save the company $70 million a year. The software
company's stock was down 0.7 percent in early trading.
In broker action, Boeing shares fell $1.15, or 2.2 percent, to $51.17 after
Banc of America Securities downgraded the aircraft maker to "neutral" from
"buy," citing concerns that continued high oil prices and worsening U.S. and
European airline news flow is likely to offset good news from elsewhere and
valuation.
Meanwhile, shares of International Paper rose 1 percent to $39.49 after
Prudential Equity Group raised its rating on the company, saying the forest
products and paper group will benefit from stronger-than-anticipated growth in
in containerboard and box demand.
This story was supplied by CBSMarketWatch. For further information see
www.cbsmarketwatch.com.
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