OIL’S WELL FOR MARTS
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The economy’s sudden timeout from its twin chokeholds of overpriced oil and crumbling stock values is giving Ben Bernanke a better hand to play to fight inflation.
Crude oil prices tumbled yesterday for the second day in a row as oil traders switched to big bets that crude will drop in coming days on slowing demand over the vacation season when consumers are expected to drive less.
The slide gave the greenback new strength and triggered a global stock rally that sent the Dow soaring nearly 280 points higher.
Crude is now down $13 a barrel from its all-time high last week. It settled yesterday at $134.60, off $4.14, after dropping $6.44 the prior day.
The US Energy Information Administration reported crude inventories rose by 3.0 million barrels last week – erasing an earlier forecast of shortages ahead in gasoline and diesel.
Prices at gas pumps also have been backfiring, causing consumer demand to drop in recent weeks as much as 5 percent in some areas.
The Dow Jones industrial average jumped 276.74, or 2.52 percent, to 11,239.28. The S&P gained 30.45, or 2.51 percent, to 1,245.36. The Nasdaq rose 69.14, or 3.12 percent, tot 2,284.85.
Helping to drive the stock rally here was a surge in banks, led by better-than-expected earnings results from Wells Fargo. The KBW banking index jumped more than 17 percent in the biggest single-day gain since at least 1993.
Wells Fargo raised its dividend 10 percent despite a 23 percent decline in profit caused by a surge in bad loans, and its shares jumped 32.8 percent to $27.23.
“What’s taking place today is a market recovery driven by financials and a continued drop in oil prices,” said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates.
Battered bank stocks saw giant gains across the board, with shares of Citigroup rising 13 percent, Lehman Brothers up 26 percent and JPMorgan Chase up 16 percent.