ENERGY shares helped the Dow and S&P 500 end a three-day losing streak yesterday, even as investors worried rising fuel costs will undercut economic growth.
Earnings reports from smaller companies, including homebuilder Lennar and store chain Sears Holdings, also supported stocks, but volume was low for a second day, raising questions about the sustainability of the longer term rally.
The S&P Energy sector rose 1.2 percent on a 2 per cent rally in the price of oil, but transportation and consumer stocks weakened on worries about higher energy costs.
US crude futures settled 2 per cent higher at $91.11 per barrel after new production snags added to supply concerns even as the Trans Alaska Pipeline remained shut, idling 12 percent of US oil production.
“There’s a big feeling we’re going to have $100 barrel oil pretty quickly,” said Shawn Hackett, president at Hackett Advisors in Boynton Beach, Florida.
He said that is clearly bullish for the sector, but oil above $90 a barrel could “take disposable income away from the economy and could hurt demand.”
Airline shares were hit by the rise in crude, with the NYSE Arca airline index off 1.5 per cent and the Dow Jones transport average down 1 per cent after hitting its highest in more than two years on Monday. The S&P retail index dipped 0.3 per cent.
Sears Holdings rose 6.3 per cent to $75.02 after the company raised its profit outlook above Wall Street estimates, citing strong sales.
Lennar gained 7.4 per cent to $20.30 after impressive fourth-quarter results. The PHLX Housing sector index gained 1.7 per cent.
Alcoa posted a quarterly profit that topped Wall Street’s expectations but the aluminum maker’s shares fell 1 per cent to $16.33.
The Dow Jones industrial average gained 34.43 points, or 0.30 per cent, to 11,671.88. The Standard & Poor’s 500 Index added 4.73 points, or 0.37 per cent, to 1,274.48. The Nasdaq Composite Index rose 9.03 points, or 0.33 per cent, to 2,716.83.
The Dow and S&P 500 had ended down for the past three sessions.