Saudi Proposal Gives Markets Some Solace

Wall Street got a break from oil price worries Friday, with stocks rising modestly as Saudi Arabia pushed for OPEC to boost production. Even so, the Dow Jones industrial average finished the week under the 10,000 mark for the first time this year.

The prospect of lower oil prices also sent Treasury bond yields higher. For the benchmark 10-year note, the yield rose to 4.76% from 4.70% on Thursday.

“If oil prices fall, it will help to stimulate economic activity -- the profit outlook will be better. And also lower oil would bring down costs, making stocks the better asset class,” said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co.

Saudi Arabia proposed raising the Organization of the Petroleum Exporting Countries’ production ceiling by more than 2 million barrels a day. In New York trading, near-term oil futures fell 87 cents to $39.93 a barrel -- the first closing price under $40 in 10 days.

Analysts cautioned that the proposal might not be approved in June, when OPEC ministers next meet. That tentativeness was reflected by yet another day of light volume in the major markets.

“I view it as temporary,” Ryan Smith, managing director of equity trading at Banc One Investment Advisors in Columbus, Ohio, said of the oil-inspired rally. “We’ll have to wait and see if they follow through.”

The Dow gained 29.10 points, or 0.3%, to 9,966.74. Earlier in the session, the Dow had been up 99 points.

Broader stock indicators were also moderately higher. The Standard & Poor’s 500 index rose 4.37 points, or 0.4%, to 1,093.56, and the Nasdaq composite index was up 15.50 points, or 0.8%, at 1,912.09, breaking past the 1,900 mark for the first time since May 14.

For the week, the Dow finished 0.5% lower, the S&P; was down 0.2%, and Nasdaq gained 0.4%. It was the third straight week of losses for the Dow and the S&P; 500. Nasdaq reversed a two-week slide.

It was also the first week the Dow finished below 10,000 since the week ended Dec. 5.

Investors were somewhat more inclined to buy after Thursday’s report of a lower-than-expected increase in the Conference Board’s index of leading economic indicators. The report indicated that the economy might not be overheating as much as feared, and Wall Street interpreted that as relieving some of the pressure on the Federal Reserve to raise interest rates.

The change in sentiment allowed investors to react enthusiastically to upbeat earnings reports for the first time in weeks. Wall Street largely had shrugged off companies’ solid first-quarter reports last month as investors were fixated on interest rates and the possibility that higher borrowing costs would erode corporate earnings for the coming quarters.

Still, many analysts question whether Friday’s improvement in investor sentiment can be sustained with so many unresolved issues and problems in the United States and overseas.

“Our view is it’s going to be a chaotic market environment” until the presidential election in November, said Jason R. Graybill, senior portfolio manager at Abner, Herrman & Brock Asset Management in New York. “Leading into November, we’re going to get clarity on a lot of the uncertainties out there.”

Among Friday’s market highlights:

* Nordstrom surged $2.67 to $39.90 after beating Wall Street’s expectations with first-quarter profit that more than doubled on a 13% gain in sales at stores open more than a year.

* Gap was up 7 cents at $22.58 after news that the clothing retailer boosted its fiscal first-quarter profit by 54%, matching analysts’ expectations.

* Martha Stewart Living Omnimedia jumped 75 cents to $9.30 after a government witness at Martha Stewart’s trial was charged with perjury for allegedly making false statements on the stand, sparking speculation on Wall Street that Stewart’s conviction could be reversed.