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Stocks dollar rise as oil drops day before election Original Source Link: (May no longer be active)
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U.S. Stocks, Dollar Rise as Oil Drops
Mon Nov 1, 2004 06:27 PM ET
By Caroline Valetkevitch
NEW YORK (Reuters) - A drop in record-high oil prices lifted U.S. stocks and the dollar but pressured bonds on Monday before Tuesday's U.S. presidential election.
Oil prices fell below $50 to their lowest in a month on market speculation that a win for Democratic challenger Sen. John Kerry against President Bush could ease the geopolitical friction that has helped fuel this year's record-breaking rally.
The drop in the price of oil caused stocks to record their fifth straight session of gains.
But worry over an uncertain election outcome and a sharp drop in Merck & Co. (MRK.N: Quote, Profile, Research) muted gains in stocks, traders said.
Gold prices slid on dollar strength.
Record oil prices have hampered stocks for weeks as investors fret over the effect of high energy prices on profits. As crude fell, economically sensitive stocks like United Technologies Corp. (UTX.N: Quote, Profile, Research) and Caterpillar Inc. (CAT.N: Quote, Profile, Research) helped support the Dow.
The Dow Jones industrial average rose 26.92 points, or 0.27 percent, to close at 10,054.39. The Standard & Poor's 500 Index inched up 0.31 of a point, or 0.03 percent, to finish at 1,130.51. The technology-laced Nasdaq Composite Index gained 4.88 points, or 0.25 percent, to end at 1,979.87.
The blue-chip Dow and the broader S&P 500 scored their first five-day streak of gains since the last week of July.
"The market's waiting for an excuse to buy," said Michael Metz, chief investment strategist at Oppenheimer & Co.
Energy analysts on Monday said a Kerry victory may mean as much as a 10 percent drop in oil prices next year, while a Bush win would be welcomed by companies in the oil sector.
"Under a Kerry administration, we'd likely have a much more interventionist SPR policy," said Jamal Qureshi, market analyst at PFC Energy in Washington. "And when you look out a bit further, Bush is more likely to be aggressive in the Middle East, particularly in Iran."
The Bush administration continues to add crude to the SPR, the national Strategic Petroleum Reserve, despite high prices.
On the New York Mercantile Exchange, crude for December delivery (CLc1: Quote, Profile, Research) settled down $1.63 at $50.13 after diving as low as $49.30 a barrel, breaking below $50 the first time in nearly a month. U.S. crude peaked a week ago at $55.67 a barrel.
In London, December Brent crude (LCOc1: Quote, Profile, Research) lost $1.92 to $47.06 a barrel.
BONDS FALL, DOLLAR GAINS, GOLD SLIPS
A sharp retreat in the oil market suggested energy might take less of a toll on U.S. economic growth than previously thought, causing bonds to slip and the dollar to strengthen, analysts said.
The benchmark 10-year note (US10YT=RR: Quote, Profile, Research) was down 13/32 in price at 101-12/32 for a yield of 4.08 percent, compared with 4.03 percent at Friday's close.
The two-year note (US2YT=RR: Quote, Profile, Research) dipped 3/32 to 99-26/32, taking the yield up to 2.60 percent from 2.56 percent. The 30-year bond (US30YT=RR: Quote, Profile, Research) shed 24/32 to 107-31/32, levering its yield up to 4.84 percent from 4.79 percent.
Cheaper oil also increases the likelihood of more Federal Reserve interest-rate hikes if the U.S. economy is expanding strongly, analysts said.
By late afternoon in New York, the euro (EUR=: Quote, Profile, Research) was down about 0.2 percent at $1.2750, according to Reuters data.
Against the yen (JPY=: Quote, Profile, Research) , the dollar was trading at 106.41 yen, up about 0.6 percent on the day.
The firmer dollar and oil price drop pressured gold, though the safe-haven metal stayed propped up by uncertainty over the neck-and-neck presidential contest.
COMEX December gold (GCZ4: Quote, Profile, Research) fell $1.20 to $428.20 an ounce.
EUROPEAN STOCKS RISE, JAPANESE SHARES DIP
The oil price slump helped European stocks close at three-week highs, with British Airways(BAY.L: Quote, Profile, Research) leading a rise in airlines, but Dutch bank ABN AMRO(AAH.AS: Quote, Profile, Research) fell after a weak operating outlook.
The FTSE Eurofirst 300 index ended 0.88 percent higher at 1,006.93 points -- its highest close in three weeks.
In Tokyo, the Nikkei average fell 36.71 points, or 0.34 percent, to close at 10,734.71, adding to Friday's dip of 0.75 percent.
(Reporting by Megan Davies, Gene Ramos, Richard Mably, Kevin Plumberg, Zachary Howard and Pedro Nicolaci da Costa)
© Reuters 2004. All Rights Reserved.
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