US stocks: Prices rise as oil drops, Gateway falls late

NEW YORK - US stocks rose on Monday as oil prices receded from a record high above US$67 and data showed the US economy appears to be on solid footing.

Shares of Apple Computer Inc. and Time Warner Inc helped drive the broad Standard & Poor's 500 index higher. Apple climbed 3.4 per cent after brokerage Piper Jaffray named it a top large-cap pick, while Time Warner advanced after billionaire investor Carl Icahn made some demands, including the spinoff of its cable business.

Light, sweet crude for September delivery fell 59 cents to settle at US$66.27 a barrel on NYMEX.

"It's a relief reaction," said Jim Awad, chairman of Awad Asset Management, in New York. "You had a modest reflex reaction to the fact that oil was down." The Dow Jones industrial average gained 34.07 points, or 0.32 per cent, to end at 10,634.38. The S&P 500 gained 3.48 points, or 0.28 per cent, to finish at 1,233.87. The technology-laced Nasdaq Composite Index rose 10.14 points, or 0.47 per cent, to close at 2,167.04.

After the closing bell, shares of personal computer maker Gateway Inc. slid 8.7 per cent to US$3.55 on the Inet electronic brokerage network from a US$3.89 close on the New York Stock Exchange after the company cut its 2005 revenue and earnings forecast.

During the regular session, stocks advanced as US oil futures prices eased further away from last Friday's record high of US$67.10 a barrel. The decline in the price of crude came after a week in which NYMEX oil futures hit new highs each day.

High oil prices are typically a negative for stocks since they drive up many corporate costs and eat into consumers' discretionary spending.

Analysts said they expect stock investors to keep a close eye on oil prices for the rest of the week.

"We're going to be very sensitive to oil, without a doubt," said Scott Wren, senior equity strategist at A.G. Edwards & Sons, of St. Louis.

Oil has been the biggest negative variable investors have been facing, he noted.

"There's been a lot of good economic news, inflation is low," Wren said. "The market wants to go up."

On the economic front, a report from the New York Federal Reserve Bank showed that new orders and employment at New York State factories showed gains in August from July, though overall manufacturing growth slowed for the month.

A survey by the Federal Reserve Bank of Philadelphia showed private-sector economists have raised their forecast for 2005 US real gross domestic product growth.

Among economically sensitive Dow stocks, aircraft makers soared 14.8 per cent to US$30.33.

Shares of Dow Jones & Co. rose 11 per cent, or US$4.09, to US$41.14 on the NYSE after the New York Post, without naming its source, reported that members of Dow Jones' controlling family were looking to sell the publisher of the Wall Street Journal. A Dow Jones spokesman declined to comment.

Shares of Apple, which makes Macintosh computers and iPod music players, rose 3.4 per cent, or US$1.58, to US$47.68 on Nasdaq after Piper Jaffray named it a top large-cap pick.

Time Warner shares rose 1.4 per cent, or 26 cents, to US$18.50 on the New York Stock Exchange after billionaire investor Carl Icahn called on the media company to separate its cable business and buy back at least US$20 billion worth of its stock to boost shareholder value.

Delta Air Lines was the worst performer in the S&P 500. The stock plunged 13.7 per cent, or 22 cents, to US$1.39 on the NYSE after the New York Times reported on Saturday that the struggling air carrier has begun arranging the financing it would need, should it seek bankruptcy protection.

Trading was moderate, with 1.21 billion shares changing hands on the NYSE, below the 1.46 billion daily average for last year. About 1.39 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

The number of shares advancing in value exceeded the number declining by a ratio of more than 9 to 7 on the NYSE and by about 3 to 2 on Nasdaq.

- REUTERS