Stocks rallied Tuesday as oil prices dropped amid hopes the Britain-Iran hostage crisis will be resolved diplomatically. Also, a report on pending home sales rose. Biotechs, health care, telecom, and cyclical issues were among the best performers for the day, says S&P.
The Dow Jones industrial average rose 128 points, or 1.03%, to 12,510.3. The broader Standard & Poor's 500 index gained 13.22 points, or 0.93%, to 1,437.77. The tech-heavy Nasdaq composite climbed 28.07 points, or 1.16%, to 2,450.33.
Energy markets were in the spotlight Tuesday. May futures for West Texas Intermediate crude oil skidded $1.28 to $64.66 per barrel after Iran signaled willingness to talk with Britain regarding the 15 British sailors captured by Iran's Revolutionary Guard on Mar. 23. Reuters reported that UK foreign Minister Beckett said she urges caution against assuming a swift resolution to the Iran sailor crisis, but focus was on prime minister Blair's comments earlier that the "the next 48-hours will be fairly critical," reports Action Economics.
Investors are hopeful that tomorrow's February factory orders, ISM services index, and ADP employment data will show the economy is improving, says S&P.
In economic news Tuesday, the pending home sales index rebounded 0.7% to 109.3 in February, after sliding 4.2% in January to 108.5. On a year-over-year basis, the index is down 8.7% compared to down 8.2% in January. "The data continue to suggest some potential stabilization in the housing contraction, though the small increase in February probably won't have much impact on the markets," says Action Economics.
U.S. auto sales for March should come in down 2% to a 16.2 million-unit annual pace, reports Action Economics. Ford (F) reported March sales dropped 9% year-over-year, while Daimler-Chrysler (DCX) fell 4% and General Motors (GM) declined 7.7%.
Among stocks moving Tuesday, Google (GOOG) announced that it would partner with EchoStar (DISH) to introduce the first automated system for buying, selling, delivering and measuring television ads on EchoStar's national satellite programming networks.
XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI) lost ground on word that the Carmel Group, an influential research firm, will release a new report today that outlines the strongest arguments yet against merging the satellite radio companies, according to the New York Post.
The subprime lending sector suffered another setback Tuesday as Fremont General (FMT) was ordered to stop offering subprime mortgages. The company also said Grant Thornton LLP is resigning as its auditor.
However, Accredited Home Lenders (LEND) rose after the company says it closed its previously proposed financing transaction with Farallon Capital Management and related entities; as a result, Farallon received warrants to buy 3.23 million Accredited shares at an excercise price of $10 a share.
Airline shares climbed, led by Continental Airlines (CAL) after the carrier said it flew 8 billion consolidated revenue passenger miles in March, representing a traffic increase of 3.4%. It also said passenger revenue per available seat mile is estimated to have increased between 4.5% and 5.5%, according to news reports.
Caterpillar (CAT) was higher after the company, which gets about a third of revenue selling engines, said sales of the machines may get a boost from a $29 billion free-trade accord signed yesterday between the U.S. and South Korea.
Theravance (THRX) edged up after the company said joint studies with GlaxoSmithKline (GSK) on compounds for the treatment of asthma and chronic obstructive pulmonary disease showed "positive" results. GSK shares were little changed.
Assurant (AIZ) rose on news that the specialty insurer will replace Realogy (H) in the S&P 500 index.
Major European equity indexes moved up Tuesday amid the declines in crude oil. In London, the FTSE 100 index gained 50.6 points, or 0.8%, to 6,366.1. France's CAC 40 index added 66.35 points, or 1.18%, to 5,711.91. In Frankfurt, the DAX index rose 108.39 points, or 1.56%, to 7,045.56.
Asia's major indexes finished higher Tuesday. Japan's Nikkei 225 index was up 215.64 points, or 1.27%, to 17,244.05. In Hong Kong, the Hang Seng index climbed 193 points, or 0.97%, to 20,002.70.
Treasury prices fell as investors shifted back into stocks amid a glimmer of optimism on the Britain-Iran hostage stalemate, says Action Economics. The 10-year note fell 06/32 to 99-22/32 for a yield of 4.66%.