Stocks Climb Off the Mat

Falling crude and rising consumer confidence help the Dow add more than 100 points.
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Updated from 4:13 p.m. EDT

Sharply lower oil prices and a strong consumer confidence reading Tuesday helped stock proxies climb around 1% and reclaim some of the ground lost over the last few sessions.

The

Dow Jones Industrial Average

rose 114.85 points, or 1.12%, to 10,405.63, and the

S&P 500

added 10.88 points, or 0.91%, to 1201.57. The

Nasdaq Composite

gained 24.69 points, or 1.21%, to 2069.89. The 10-year Treasury note was down 18/32 in price to yield 3.97%, while the dollar rose against the yen and euro.

The Dow gained with help from

Home Depot

(HD) - Get Report

,

General Motors

(GM) - Get Report

and

United Tech

, all rising at least 2.2%.

Trading volume on the

New York Stock Exchange

was 1.37 billion shares, with advancers beating decliners by a 3-to-1 margin. Volume on the Nasdaq was 1.62 billion shares, with advancers outpacing decliners 4 to 1.

Crude oil, whose steady march to a record intraday price of $60.95 a barrel Monday has coincided with a 333-point drop on the Dow over the last six sessions, slid dramatically in Nymex floor trading. Crude for August delivery dropped $2.34 to $58.20 a barrel.

Paul Mendelsohn, chief investment strategist with Windham Financial, believes that "investors appear to accept the premise and market consensus that higher energy prices will have little long-term impact on consumer spending and economic growth. Their only focus still appears to be on lower interest rates, which have traditionally pushed equity prices higher."

Investors will get a key reading on the rate front Thursday when the

Federal Open Market Committee

concludes a two-day meeting in Washington. Economists expect the FOMC to raise its fed funds target by a quarter-point to 3.25%. In the only piece of economic data Tuesday, the Conference Board said consumer confidence for June increased to 105.8, a three-year high. Economists expected the index to rise to 104.1 from May's adjusted reading of 103.1.

"I'm a little surprised at the strength we've seen today," says John Hughes, equity strategist with Shields & Co. "It started with the lower crude prices early, but it's taken even more of a positive tone after the economic data. It's the end of the quarter, and the Fed meeting is coming up, so there may be some window-dressing leading up to these. It's a pretty decent broad-based rally, so hopefully we can hang on."

Morgan Stanley raised its rating on the oil sector to attractive from in line, citing greater demand and shrinking inventories.

Royal Dutch/Shell

(RD)

added 2.4%,

Exxon Mobil

(XOM) - Get Report

lost 0.4%,

ConocoPhillips

(COP) - Get Report

was lower by 2.4%, and

BP

(BP) - Get Report

gained 0.6%.

Stronger sectors Tuesday included semiconductors, health care, technology, homebuilding and retail. Energy, education services and disk drives were weaker.

Among companies,

Google

(GOOG) - Get Report

fell slightly after piercing $300 for the first time on Monday. Shares of the search-engine company have tripled in 10 months, making it the biggest media company by market cap. Google finished at $302, down $2.10, or 0.7%. The stock did touch a new all-time intraday high of $309.25 during Tuesday's session.

IBM

(IBM) - Get Report

gained Tuesday despite saying the

Securities and Exchange Commission

launched an informal probe into the handling of news that the company would expense employee stock options around the time of its first-quarter earnings release. The stock rose $1.42, or 1.9%, to $75.30.

Education stocks fell after

Apollo Group

(APOL)

said third-quarter earnings rose 30% from a year ago to $141.8 million, or 77 cents a share, on a 25% rise in revenue to $619 million. Analysts had been forecasting earnings of 74 cents a share on sales of $625 million. The company guided the third quarter in line with estimates.

Apollo shares lost $1.10, or 1.4%, to $79.13, while shares of

Corinthian Colleges

(COCO)

were off 10 cents, or 0.8%, to close at $12.76.

In M&A activity,

Sun Microsystems

(SUNW) - Get Report

reached an agreement to acquire business integration software company

SeeBeyond

(SBYN)

for $4.25 a share, valuing the deal at about $387 million including the assumption of employee stock options. Sun was higher by 1.4%, to $3.74, while SeeBeyond rose 30.8% to $4.29.

Among the day's earnings news,

Topps

(TOPP)

said fiscal first-quarter earings dropped 78% to $897,000, or 2 cents a share, falling below the average analyst consensus of EPS of 12 cents a share. The baseball card company said that softness in U.S. and European sports caused profit to slide in the quarter. Topps finished unchanged at $10.50.

Payroll processor

Paychex

(PAYX) - Get Report

late Monday posted fiscal fourth-quarter net income of $101.5 million, or 27 cents a share, up from $61.4 million, or 16 cents a share, a year ago. Revenue jumped about 15% to $379 million. Analysts expected the company to earn 24 cents a share, according to Thomson First Call. Paychex added $2.99, or 10%, at $33.01.

Also Monday,

Dean Foods

(DF) - Get Report

announced the successful spinoff of its specialty foods business,

TreeHouse Foods

(THS) - Get Report

, which will make private label and regionally branded consumer packaged goods. Dean Foods ended down 17 cents, or 0.5%, to $34.08.

In ratings news, Goldman Sachs downgraded

Seagate Technology

(STX) - Get Report

to underperform from market perform, citing deceleration in the disk drive industry. Seagate was down 65 cents, or 3.6%, to close at $17.45.

Other movers included

Intel

(INTC) - Get Report

, closing 1.8% higher after

Advanced Micro Devices

(AMD) - Get Report

filed an antitrust lawsuit against the company;

Nokia

(NOK) - Get Report

, gained 0.2%; and

Internet Initiative Japan

(IIJI)

, added 0.1%.

Overseas markets were higher, with London's FTSE 100 gaining 0.9% to 5090 and Germany's Xetra DAX adding 0.7% to 4557. In Asia, Japan's Nikkei rose 0.9% overnight to 11,514, while Hong Kong's Hang Seng added 0.8% to 14,287.