Stocks Get Back in Gear

Futures point to a jump as oil and interest rates decline.
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Stocks were poised to pop Tuesday as falling interest rates, another decline in oil prices and gold's move above $500 an ounce helped cure a brief case of risk aversion.

Index futures recently showed the

S&P 500

trading 4 points above fair value, while the Nasdaq 100 was set for a 7-point jump. Stocks are coming off their first down day in more than a week, with the

Dow Jones Industrial Average

losing 0.4% to 10,891 and the

Nasdaq Composite

falling 1% to 2239.

The 10-year Treasury bond rose 1/32 in price to yield 4.40%, while the dollar rose against the yen and euro.

Treasury yields backed down on Monday after a report showed a slowdown in sales of pre-owned homes last month. The report led to a downgrade of

Countrywide

(CFC)

at Morgan Stanley Tuesday.

On Tuesday, investors will see reports on consumer confidence and durable goods orders.

Gold, which is up 14% in 2005, briefly crossed over the $500 mark for the first time in 18 years on Nymex earlier. The metal, which traditionally is used as a hedge against inflation, has also benefited from heightened jewelry demand and a recent prediction by the head of

Newmont Mining

(NEM) - Get Report

that the metal is headed to $1,000.

Oil, meanwhile, which lost $1.41 a barrel on Monday, continued to ease, recently trading down 46 cents to $56.90 on the January contract. Warm weather in the Northeast, calming words from OPEC and the steady rebuilding of Gulf Coast energy infrastructure has contributed to the move.

Overseas markets were mixed, with London's FTSE 100 recently down 0.1% to 5470 and Germany's Xetra DAX adding 0.1% to 5179. In Asia, Japan's Nikkei fell 0.4% overnight to 14,928, while Hong Kong's Hang Seng slipped 0.5% to 15,029.

In corporate news,

Western Digital

(WDC) - Get Report

, the disk-drive maker sometimes used as a proxy for consumer hardware sales, bumped up second-quarter earnings guidance Monday thanks to strong sales of notebooks and PCs.

The news was followed by an upgrade of

Seagate

(STX) - Get Report

at Goldman Sachs, which cited strong demand among business customers and for parts used in

Microsoft's

(MSFT) - Get Report

Xbox.

Elsewhere in ratings news, UBS cut

Bellsouth

(BLS)

to neutral from buy, citing margin decay in the company's traditional local telephony division.

Express Scripts

(ESRX)

is up more than 3% on Instinet after raising its 2006 profit estimate late Monday on strength in generic drug use and growth in its specialty pharmacy business.