A steep drop in oil prices gave Wall Street a big rally Wednesday, propelling the Dow Jones industrials up more than 160 points and giving the major indexes one of their best days of 2004.
The buying took off immediately after the Energy Department reported an increase in distillate reserves — heating oil and other derivative products — of 2.3 million barrels, far higher than Wall Street expected. Gasoline and crude inventories also rose substantially.
That triggered the largest single-day decline in crude oil futures in more than three years. The price of a barrel of light crude plummeted $3.64 to settle at $45.49, its lowest level since Sept. 16, on the New York Mercantile Exchange. Stocks climbed steadily through the session as oil prices tumbled.
“Oil futures go down, stocks go up. I think that’ll be a pattern for a long time, and the good news is that if we keep getting inventory reports like this, oil prices will be ready for a big correction downward,” said Brian Belski, market strategist at Piper Jaffray. “Overall, this market has clearly turned to a growth mode over the past few months, and should continue to grow.”
The Dow Jones industrial average rose 162.20, or 1.56 percent, to 10,590.22. It was the third-largest single-session point gain of 2004, and the Dow’s best close since March 5.
Broader stock indicators also made major gains. The Standard & Poor’s 500 index was up 17.55, or 1.5 percent, at 1,191.37, its best close since Aug. 7, 2001. The Nasdaq composite index gained 41.42, or 1.98 percent, to 2,138.23 for its best closing since Jan. 26.
The good news on oil powered a rally that started with positive economic data issued before the session. The Commerce Department reported an 0.7 percent rise in consumer spending in October, a better-than-expected showing and welcome news after a mediocre start to the holiday shopping season. Consumer incomes, considered a key barometer of future spending, also rose 0.6 percent for the month.
Wall Street also welcomed the latest reading of the Institute for Supply Management’s manufacturing index for November, which measures the nation’s industrial activity. The index came in at 57.8, up from 56.8 in October and better than the 57 reading Wall Street expected.
“The personal income and spending numbers were very solid across the board, and we’ve been looking for these kind of numbers for some time. It’s nice to see them right around the holiday season,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland.
Advancing issues outnumbered decliners by nearly 5 to 2 on the New York Stock Exchange, where preliminary consolidated volume came to 2.22 billion, compared to 1.97 billion on Tuesday.
The Russell 2000 index of smaller companies was up 9.91, or 1.56 percent, at 643.68.
Overseas, Japan’s Nikkei stock average fell 1.06 percent. In Europe, Britain’s FTSE 100 closed up 0.69 percent, France’s CAC-40 climbed 1.14 percent for the session, and Germany’s DAX index gained 1.45 percent.