Stocks Advance as Oil Retreats

OPEC's continuing cha-cha-cha dance ahead of its March 16 meeting brought oil prices down on Tuesday, helping bolster stocks. Major averages also got a boost from a series of analyst upgrades in semiconductors and health care.

Perhaps the oil producers have taken to issuing trial balloons the way politicians do but they may need a briefing from Federal Reserve Chairman Alan Greenspan on how to issue less disruptive market signals.

Over the weekend, OPEC officials were talking of possible production cuts, so on Monday oil rallied to its highest price in four months. But on Tuesday, OPEC Secretary General Adnan Shihab-Eldin reversed course and said that the current price "is not conducive to considering cuts in production." Oil futures ended down almost 1% at $51.40 a barrel, albeit recovering from an intraday low of $50.65.

With the danger of crude receding, the Dow Jones Industrial Average gained almost 64 points, or 0.6%, to 10,830 and the S&P 500 added 0.6% to 1210.41. The Nasdaq Composite rose 1% on the back of the semiconductor upgrade to 2071.25.

J.P. Morgan upgraded chip stocks like Intel (INTC Quote), Texas Instruments (TXN Quote) and National Semiconductor (NSM Quote). Intel, which garnered the beloved overweight ranking, added 2.6% to $24.62, while Texas Instruments and National Semi, both upgraded to neutral from underweight, gained 2.6% and 3.5%, respectively.

In other sell-side developments, Dow component Johnson & Johnson (JNJ Quote) rose 1.6% on an upgrade from Merrill Lynch.

Crude Conundrum

Oil's latest rally has attracted some attention from analysts calling for prices to drop. The climb back over $50 was aided by false fears of a U.S. attack on Iran and some OPEC chatter about production cuts, Wachovia economist Jason Schenker notes. But with growth slowing in Europe and gasoline inventories in the U.S. at record levels for this time of year, the rally won't hold, he says, predicting a move back down toward $40 a barrel.