Stocks End Higher in Volatile Session

Enthusiasm over a better than expected durable goods report was dampened by a bounce in oil prices

Major U.S. stock indexes ended higher after a volatile trading session Wednesday. The market seesawed in the wake of stronger than expected durable goods data for April and a bounce-back in crude oil prices.

Traders are questioning whether the U.S. economy will escape a recession, or is already in one, according to S&P MarketScope.

Oil recovered from recent losses to again push above the $130-per-barrel mark Wednesday. Gold futures were lower, and bonds fell on better-than-expected economic data.

On Wednesday, the Dow Jones industrial average rose 45.68 points, or 0.36%, higher at 12,594.03. The broader S&P 500 index gained 5.49 points, or 0.4%, to 1,390.84. The tech-heavy Nasdaq composite index was added 5.46 points, or 0.22%, at 2,486.70.

On the New York Stock Exchange, 18 stocks were higher for every 13 in negative territory. On the Nasdaq, the ratio was flat.

Inflation fears continue to build and there's mounting evidence of the impact that spiking energy prices are having on the broader economy. Dow Chemical (DOW) announced Wednesday that it's raising prices as much as 20% starting June 1 to offset soaring costs of energy and raw materials. Price hikes will be based on a product's exposure to cost increases. The chemicals giant said its costs for energy and raw materials could rise fourfold from 2002 levels to reach $32 billion this year.

On the economic data front, U.S. durable goods orders dropped 0.5% in April, much less than the expected 1.5% decline, while shipments increased 1.2% and inventories rose 0.5%. Transportation orders fell 8%, with aircraft & parts falling 20%, and motor vehicles down 3.3%. But durable goods orders ex-transportation climbed an impressive 2.5%, led by a 28% jump in electrical equipment after the 19% drop in March. The 0.8% increase in transportation shipments was driven by a 25% surge in semiconductors.

The strength in the overall shipments and orders figures defied weakness in industrial production and hours worked in April, alongside surprising resilience in the nondefense capital goods figures that contradict the recession scenario, Action Economics said. The data have re-affirmed the sideways trajectory for the equipment sector despite some monthly data scares earlier in the year, lowering the risk of a cyclical decline in business investment spending and sharply reducing the risk of recession, Action Economics said.

Oil prices rebounded from lows below $127 a barrel as the dollar dropped back from post-durable goods highs and reportedly on some covering of bets that oil prices would continue to fall. Prices had come under pressure again on worries that record fuel prices will cut consumption at the height of the U.S. driving season. U.S. gasoline prices at the pump reached an all-time high on May 26, curbing demand from motorists at the start of the summer, when fuel use typically peaks, Bloomberg News said.

WTI crude oil futures for July delivery traded $1.94 higher at $130.79 a barrel. Crude found support at the $125.96 level, reports S&P MarketScope. "Bulls still have $150 crude in mind," said Citi Futures' Tim Evans. "The bullish news today is price, not fundamentals."

Among other stocks in the news on Wednesday, Keycorp (KEY) shares fell after the company raised its outlook for net loan charge-offs for 2008 from 0.65% to 0.90% of average loans to 1.00%-1.30%. Second-quarter and potentially third-quarter net charge-offs are running above this range as the bank deals aggressively with reducing exposures in the residential homebuilder portfolio and anticipates elevated net loan charge-offs in its education and home improvement loan portfolios.

Polo Ralph Lauren (RL) shares jumped after the company reported fourth-quarter earnings of $1.00 per share, vs. 68 cents a year ago, on a 14% revenue rise. The company continues to expect consolidated revenues for FY 09 to increase by a low-to-mid-single digit percentage, EPS in range of $3.95-$4.05. It also set a $250 million stock buyback.

Coca-Cola Enterprises (CCE) shares fell after the world's largest bottler said it expects a mid to high single-digit decline in second-quarter profits vs. a year ago. Coca-Cola said weakening economic trends have continued to limit volume performance in North America, particularly in higher margin 20-ounce packages of sparkling beverages and water, negatively affecting operating income.

Major European indexes were mostly higher Wednesday. In London, the FTSE 100 index inched up 0.18% to 6,069.60. In Paris, the CAC 40 index rose 1.32% to 4,971.11, while Germany's DAX index advanced 1.08% to finish at 7,033.84.

In Asia, Japan's Nikkei 225 shed 1.32% to close at 13,709.44, while Hong Kong's Hang Seng index slipped 0.13% to 24,249.51.

Treasury market

Treasury prices fell after April durable goods orders data raised hopes for an economic recovery in the second half of the year, S&P says. The 10-year note fell 28/32 at 98-26/32 for a yield of 3.03%, and the 30-year bond tumbled 34/32.

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