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Stocks end higher after Fed official's comments help investors shrug off Home Depot earnings

Stocks end higher after Fed official's comments help investors shrug off Home Depot earnings

Wall Street managed a moderate advance in an uneven session Tuesday after a drop in oil prices and encouraging comments from a Federal Reserve official allowed investors to shrug off disappointment over Home Depot Inc.'s declining sales. The Dow Jones industrials set another closing high.
Home Depot, the world's largest home improvement retailer, said sales at stores open more than a year dropped in the fourth quarter, suggesting that consumers' appetite for home improvement goods is still dwindling due to the sluggish housing market.
The company's results sent the market down in early trading. But comments from outgoing Fed Governor Susan Bies, who said slumping demand for housing may have bottomed out, alleviated some concerns about the downturn dragging down the rest of the economy. Her remarks echoed those of Fed Chairman Ben Bernanke last week, who predicted that the economy will keep growing at a modest pace.
"The overall trend of the market is basically positive," said Brian Gendreau, investment strategist for ING Investment Management, pointing to Bernanke's recent forecast of moderating growth and cooling inflation. "That's a great environment for equities. Unless you have some specifically nasty news, there's no reason why the trend shouldn't be upward."
Falling oil prices, which tumbled $1.32 to $58.07 a barrel on the New York Mercantile Exchange on forecasts of warmer weather, also lent some support to stocks, as did a proposed merger between XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc.
The Dow rose 19.07, or 0.15 percent, to 12,786.64, after falling more than 60 points earlier. Tuesday's climb brought the index to its 31st record close since early October, and its biggest five-day rally since mid-November. The Dow also reached a new trading high of 12,795.93, just short of 12,800.
Markets were closed Monday for Presidents Day.
Broader stock indicators also turned higher. The Standard & Poor's 500 index rose 4.14, or 0.28 percent, to 1,459.68, and the Nasdaq composite index climbed 16.73, or 0.67 percent, to 2,513.04.
Bond prices rose slightly, with the yield on the benchmark 10-year Treasury note at 4.68 percent, down from 4.69 percent late Friday. Bies' comments helped support Treasurys, which in turn added some fuel to the stock market's advance.
The dollar rose against most other major currencies, while gold prices fell.
The decline in crude prices gave some investors reason to buy back into the market, as lower fuel costs curb consumer prices _ which could help boost discretionary spending, and reduce the chance of an interest rate hike.
Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh, noted that a drop in energy prices often pushes up stocks, but that the link between the two markets has gotten tenuous. A decrease in energy prices typically pushes down oil company stocks.
On Tuesday, ConocoPhillips fell 57 cents to $65.58; Chevron Corp. fell 69 cents to $70.12; and Exxon Mobil Corp. fell 42 cents to $74.87.
Home Depot's weaker-than-anticipated sales also kept some pressure on stocks.
"We're always fascinated with the consumer, so we're taking their temperature constantly," Caughey said.
Home Depot fell 10 cents to $41.34 after reporting same-store sales that disappointed analysts. But Wal-Mart Stores Inc. rose $1.78, or 3.7 percent, to $50.26 after issuing its financial results, which showed better-than-expected fourth-quarter profit growth and an upbeat forecast for 2007.
Hewlett-Packard Co. said after the market closed that holiday sales drove its profit up in the latest quarter by 26 percent. The results beat the analysts' expectations, but the computer and printer maker's stock fell 39 cent to $42.74 in after-hours trading after closing up 36 cents at $43.13 in regular trading.
Excitement over the merger between XM Satellite Radio Holdings and Sirius Satellite Radio gave some stocks a pop, especially in the technology sector. But the effect on the overall market was somewhat muted as investors looked more closely at the proposed deal _ trying to gauge whether XM shareholder's stock is getting a high enough premium, and whether the deal will actually happen, given the regulatory obstacles the companies must overcome.
XM Satellite rose $1.43, or 10.2 percent, to $15.41, and Sirius Satellite rose 22 cents, or 6 percent, to $3.92.
In addition to the merger between XM Satellite and Sirius, British pharmaceutical company Shire PLC is buying U.S. drug maker New River Pharmaceuticals Inc. for about $2.6 billion; Vulcan Materials Co. is acquiring construction aggregate maker Florida Rock Industries Inc. for $4.6 billion; and EMI Group PLC said it was approached by Warner Music Group about a potential takeover.
Florida Rock Industries soared $19.58, or 42 percent, to $66.54.
New River surged $4.84, or 8.3 percent, to $63.19.
Warner Music climbed 90 cents, or 4.9 percent, to $19.15.
Not all takeover talk was positive for stocks, though. General Motors Corp. slipped 39 cents to $35.95 as rumors continued to circulate that the struggling automaker is interested in buying rival Chrysler Group.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where volume came to 1.33 billion shares, compared to 1.36 billion shares at the same time on Friday.
The Russell 2000 index of smaller companies rose 7.97, or 0.97 percent, to 826.12.


Updated : 2021-10-20 22:07 GMT+08:00