Falling oil prices prompt buying surge

Stocks rallied in quiet trading Wednesday as oil prices fell for a third straight day and countered a pair of government reports that gave a mixed picture of the economy.

The moderate buying surge was welcome on Wall Street, where investors have been in no hurry to commit new money to stocks. Many have stuck to the sidelines in the face of a long list of worries, including volatile oil prices and persistent terror fears. Contributing to the session’s light volume, a number of traders are preparing to take off ahead of the Republican convention in New York next week.

“The fact that oil prices are falling off a bit is certainly helpful,” said Dave Legeay, director of portfolio management at McDonald Financial Group. “(But) fear that terrorism will disrupt supply is hanging over the market as a whole. Terrorism is also in play as we move forward to the election season.”

The Dow Jones industrial average ended up 83.11, or 0.8 percent higher, at 10,181.74.

The broader gauges also posted gains. The Nasdaq composite index rose 23.83, or 1.3 percent, to 1,860.72. The Standard & Poor’s 500 index finished up 8.77, or 0.8 percent, at 1,104.96.

Soaring fuel prices have pressured the market for weeks, with oil recently topping $46 per barrel, a record level. Prices have softened somewhat over the last few sessions, however, as anxiety about global supply eased. Crude oil for October delivery was down $1.74 at $43.47 on the New York Mercantile Exchange.

Investors were pleased with the latest report from the Commerce Department, which said orders for costly manufactured goods rose by 1.7 percent in July, an encouraging sign that the economy is shaking off the summer doldrums. The best reading in four months for durable goods — big-ticket items expected to last at least three years — was boosted by demand for airplanes, machinery and communications equipment.

But the department found sales of new homes declined by 6.4 percent in July, a far steeper drop than analysts anticipated. The decline left home sales at their lowest level since December. Figures for June were also revised lower. Analysts said the challenging labor market and high fuel prices may be making people wary about purchasing a new home.

Analysts were dubious about the strength of the rally, and whether it would hold. Aside from falling oil prices, there was little incentive for buying. A lack of solidly positive economic news and uncertainty about the outcome of the presidential race continues to weigh heavily on investors.

Advancing shares outpaced decliners by 2 to 1 on the New York Stock Exchange.

The Russell 2000 index, which tracks smaller company stocks, closed up 5.13, or 0.9 percent, at 550.14.