Oil Helps Stocks Extend Rally

Positive economic news, a drop in oil prices and strong retail earnings helped keep Wall Street’s rally alive Thursday.

Interest rate jitters and inflation woes have largely worked their way through the markets, said John Lynch, chief market analyst at Evergreen Investments. Lynch said investors were finally focusing on positive fundamentals.

“The perception of bad stuff has been priced in,” Lynch said. “Interest rates, oil prices, yes, they could serve to limit growth. But I think investors are really thinking that this is all priced in. It’s a day of clarity.”

The broad Standard & Poor’s 500 index posted a sixth consecutive increase, its longest streak since Sept. 4, adding 6.34 points, or 0.6%, to 1,121.28.

The technology-dominated Nasdaq composite index rose 8.35 points, or 0.4%, to 1,984.50, for its first five-day gain since January. The Dow Jones industrial average advanced 95.31 points, or 0.9%, to 10,205.20, led by a gain by Boeing.

Crude oil futures in New York fell to a three-week low, losing $1.26 to $39.44 a barrel. The Organization of the Petroleum Exporting Countries’ President Purnomo Yusgiantoro said the group may raise its production quotas “significantly” at a meeting in Beirut next week.

Before the market opened, the Commerce Department reported that the economy grew at a 4.4% annual rate in the first quarter of this year. The solid growth rate was slightly faster than the 4.2% pace first estimated for the quarter a month ago, and an improvement over the 4.1% growth rate for the final quarter of 2003.

Corporate profits jumped 31.6% in the 12 months ended in March, the agency said, for the biggest increase since the first quarter of 1984.

Separately, the Labor Department said new applications for unemployment benefits dropped last week by a seasonally adjusted 3,000 to 344,000.

While contributing to Wall Street’s rally, the first-quarter growth report pushed bond yields lower. The yield on the benchmark 10-year Treasury note fell to 4.60% from 4.66% on Wednesday.

Analysts attributed the drop to data showing that a key inflation index in the growth report rose at an annual rate of 1.7% in the first quarter, slower than the originally reported 2%. That tempered expectations of just how aggressive the Federal Reserve will be in raising interest rates to choke off inflation.

The dollar sold off broadly, a move analysts said was at least partly because of technical factors. The euro jumped 1.5 cents to $1.227, its highest since April 1.

Gold rallied as the dollar fell. Near-term gold futures in New York jumped $6.60 to $394.90 an ounce, a one-month high.

More than two stocks rose for every one that fell on the New York Stock Exchange. Advancing issues beat declining ones on the Big Board for the eighth day in a row, the first time that has happened since December.

Among Thursday’s market highlights:

* In the retail sector, Costco, the largest chain of U.S. wholesale clubs, advanced 63 cents to $38.07. Net income for the quarter ended May 9 rose 29% from a year earlier to 42 cents a share. That topped the average estimate of 38 cents in a Thomson First Call analyst poll.

Also, Michaels Stores, a retailer of arts and crafts merchandise, surged $4.62 to $51.32. The company said fiscal first-quarter earnings were 42 cents a share, compared with an average forecast of 37 cents.

Discount retailer Dollar Tree Stores jumped $2.21 to $27.73. The company reported a fiscal first-quarter profit of 31 cents a share, also beating expectations.

* Boeing added $1.44 to $46.20. The 3.2% rise was the biggest in the Dow average and came a day after a Pentagon spokesman said that Boeing’s proposed $23-billion agreement to lease and sell refueling tankers to the Air Force could still be adopted after an extensive review of alternatives.

* Siebel Systems gained 87 cents, or 8.6%, to $10.95, for the biggest jump in the S&P; 500. The world’s largest maker of customer-service software may win part of a five-year contract for as much as $8 billion from the Department of Homeland Security to process travel visas, Morgan Stanley analyst Ross MacMillan said in a report.

* The weaker dollar may have helped multinational stocks including Coca-Cola, up $1.10 to $51.32; Procter & Gamble, up 98 cents to $108.58; and 3M, up 95 cents to $84.95.

* An index of energy stocks lost 1.1% and was the only one of 10 S&P; 500 groups to drop. Exxon Mobil, the world’s largest publicly traded oil company, shed 18 cents to $43.37 and was the biggest drag on the S&P; 500. ChevronTexaco fell 77 cents to $90.21.