Stocks Mixed as Oil Prices Spike

The market manages a rally despite a surge in crude futures.
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Updated from 4:08 p.m. EDT

Stocks closed mixed Monday as a modest rally dwindled throughout the day in the face of a resurgence in oil prices and a negative court ruling for tobacco companies.

The

Nasdaq Composite

held on to a solid gain, up 10.89 points, or 0.57%, to 1922.98. Meanwhile, the

Dow Jones Industrial Average

enjoyed a brief stint above 10,000 after the opening bell before stumbling back down 8.31 points, or 0.08%, to 9958.43. The

S&P 500

added 1.78 points, or 0.16%, to 1095.34. The 10-year Treasury bond traded up 5/32 to yield 4.74%, while the dollar was higher against the yen but lower against the euro.

Volume stayed light, with just over 1.2 billion shares trading on the

New York Stock Exchange

, where advancers outpaced decliners by about 7 to 3. On the Nasdaq, almost 1.4 billion shares changed hands, and advancers edged out decliners by about 3 to 2.

"This is really kind of a wash here," said James Paulsen, chief investment strategist at Wells Capital Management. "Even though oil prices, and commodity prices in general, are surging today, you really don't see any significant impact from that in the bond market. Bonds are really quite sleepy. So the real message here is that when things were expected to go down with oil going up again, it really held in there pretty good today."

Paulsen added that another quiet week in the bond market could allow equities to finally catch some fire. "If

bonds can put a couple of weeks of sideways pattern in, I think that could allow the equity market to get regain some footing," he said.

The Nasdaq was propped up by

Yahoo!

(YHOO)

, which made a new 52-week high earlier and closed up 90 cents, or 3.1%, to $29.45. Also,

Sun Microsystems

(SUNW) - Get Report

closed up 12 cents, or 3.1%, to $3.98, while

eBay

(EBAY) - Get Report

added $1.77, or 2.2%, to $82.11.

Tobacco stocks were sharply lower after a federal judge ruled that the government can seek $280 billion in tobacco industry profits as part of its case against cigarette manufacturers, clearing the way for what could be the biggest civil racketeering suit in history. Shares of Dow component

Altria

(MO) - Get Report

fell $4.32, or 8.8%, to $45;

R.J. Reynolds

(RJR)

closed down $3.58, or 6.2%, to $53.68; and

Loews

(LTR)

lost $1.86, or 3.2%, to $56.45.

Saudi Arabia vowed to pump about 9 million barrels of oil a day next month, up from 8.35 million a day in March. The decision came despite OPEC's deferral of a vote to raise the cartel's overall production quota until a meeting in Beirut next week. The news brought oil futures trading on the Nymex lower before the opening bell, but crude oil for July delivery later surged $1.79, or 4.5%, to settle at $41.72 a barrel.

Brian Williamson, equity trader at Boston Company Asset Management, said there is skepticism in the investment community that the Saudis' promise will ever materialize.

"The market took this very positively, but the overhanging shadow here is that OPEC still sets the rules," Williamson said. "If Saudi pledges to increase production but OPEC says no way, then we have a problem. Whether or not they abide by the rules or they cheat is a whole different issue. It seems like it was a pledge to get the price down, but whether or not we will get that done is anybody's guess."

Williamson said trading is likely to be quiet this week until Thursday's GDP report comes out. "You're going to probably see some light trading and people taking some bets on what's going to happen with the economic data coming out at the end of the week," he said. "Some really bullish news could raise the interest rate flag again and provoke a negative reaction from investors."

Strong employment reports for March and April, coupled with signs of inflationary pressure in the economy, have led to heightened expectations that the

Fed

will raise its fed funds rate, which is currently set at a 45-year low of 1%, sometime in the coming months. Fed Chairman Alan Greenspan reinforced this view when he warned after a May 4 Fed meeting that "policy accommodation can be removed at a pace that is likely to be measured."

While Saudi Arabia was promising to boost output,

Royal Dutch-Shell

(RD)

announced it is cutting its estimate of its own reserves for the fourth time this year. The petroleum giant cited a change in the way it makes the estimate in Canada. When all is said and done, Shell's reported reserves for 2002 will be cut by 4.47 billion barrels, up from the company's last estimate of 4.35 billion. Its shares ended up 78 cents, or 1.6%, to $49.12.

Elsewhere,

Medtronic

(MDT) - Get Report

said after the close that fourth-quarter earnings beat analysts' estimates, rising to $568.9 million, or 47 cents a share, including items, up from $487.1 million, or 40 cents a share, in the same quarter last year. Its shares were up slightly in after-hours trading after dipping 31 cents, or 0.6%, to $47.35 during the session.

Lucent

(LU)

announced an agreement to acquire voice-over-Internet-protocol systems maker Telica for $295 million in stock and options. Lucent expects to complete the acquisition in the fourth quarter and said it might take a charge to cover in-process research and development in that period. Its shares closed up 3 cents, or 0.9%, to $3.22.

PeopleSoft

(PSFT)

closed up 25 cents, or 1.4%, to $17.65 after the stock was upgraded by Morgan Stanley. The business-software maker is seeing a rebound in its midmarket offerings, while customers grow confident that

Oracle

's

(ORCL) - Get Report

hostile takeover bid is in the rearview, Morgan Stanley opined. Shares of Oracle added 13 cents, or 1.2%, to $11.36.

Overseas stocks were mixed, with London's FTSE 100 closing down 0.1% to 4429 while Germany's Xetra DAX added 0.9% to 3868. In Asia, Japan's Nikkei closed up 0.3% to 11,102, while Hong Kong's Hang Seng added 0.8% to 11,663.

On Tuesday, economics will take the stage at 10 a.m. EDT, when the Conference Board is expected to report its consumer confidence index rose to 94 in May, up from 92.9 in the previous month. Also, the National Association of Realtors is expected to report that existing home sales stayed flat in April, at an annualized 6.48 million.

Before the opening bell,

HJ Heinz

(HNZ)

will report fourth-quarter results. Wall Street's consensus estimates indicate the ketchup maker will say it earned 58 cents a share after special items, up from 52 cents a share in the same quarter last year.