Stocks advance following sharo drop in oil prices

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NEW YORK (AP) _ Stocks rose moderately Wednesday as another decline in oil prices and several upbeat profit reports eased some of Wall Street's concerns about the economy.

Investors appeared unfazed by the Federal Reserve's Beige Book, which provides readings on the U.S. economy by region and indicated that business conditions have slowed in recent months as consumer spending has turned sluggish. The report arrives two weeks before policymakers' next meeting but seemed to hold few surprises for investors.

Regardless, Wall Street believes the recent easing of oil prices, if sustained, could give a crucial boost to the economy. Crude has retreated as Hurricane Dolly looked likely to spare key oil installations in the Gulf of Mexico and after the government reported Wednesday that domestic inventories increased last week as consumers curbed their energy use. But oil came off its lows — and stocks pared their gains — after the hurricane strengthened to a Category 2 storm.

While oil again tugged at stocks as it has for months, investors also examined a raft of earnings reports that indicated not all corporate profits were suffering because of the slower economy. That left some investors more upbeat about the prospects for the overall economy. AT&T Inc., McDonald's Corp. and Pfizer Inc., all among the 30 stocks that make up the Dow Jones industrial average, weighed in with reports that generally pleased investors.

"Oil is a positive but I think bigger than that is the earnings news is not as catastrophic as people were thinking," said Noman Ali, portfolio manager of U.S. equities for MFC Global Investment Management in Toronto. "Some of the bellwethers are reporting earnings that are better-than-expected. And outside of the financials things, aren't so bad."

In midafternoon trading, the Dow rose 52.92, or 0.46 percent, to 11,655.42 after rising nearly 100 points in the early going. On Tuesday, the blue chips gained 135 points.

Broader stock indicators advanced. The Standard & Poor's 500 index rose 8.70, or 0.68 percent, to 1,285.70 and the technology-laden Nasdaq composite index rose 21.25, or 0.92 percent, to 2,325.21.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.09 billion shares.

Bond prices declined as investors moved some money into equities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.15 percent from 4.10 percent from late Tuesday.

The dollar was mostly higher against other major currencies, while gold prices fell.

A barrel of light, sweet crude fell $2.74 to $125.68 on New York Mercantile Exchange. Oil is down more than $20 since hitting a record above $147 just weeks ago.

A drop in energy prices would benefit a wide spectrum of companies, including airlines, manufacturers and even retailers. It also helped distract investors from some disappointing earnings delivered this week — especially from struggling banks and brokerages.

AT&T rose $1.51, or 4.8 percent, to $33.33 after the company said quarterly profits rose amid a big spike in wireless subscribers that offset its shrinking landline business. The biggest U.S. phone company is the official carrier of Apple Inc.'s iPhone, and that helped add 1.3 million wireless subscribers during the period.

Pfizer, the world's biggest drug maker, said its second-quarter earnings more than doubled as restructuring charges declined and the weak dollar helped lift overseas revenue. It narrowly beat Wall Street expectations. The stock rose 72 cents, or 3.9 percent, to $19.07.

McDonald's credited strong overseas sales with driving the company's second-quarter profit. The nation's largest restaurant chain easily surpassed Wall Street's expectations. The stock fell $1.24, or 2.1 percent, to $58.88.

Boeing Co. fell $2.56, or 3.7 percent, to $66.70 after reporting that second-quarter earnings fell 19 percent because a $248 million charge related to a defense program. The world's second-largest commercial airplane maker had already warned it would book the expense.

Washington Mutual Inc. fell 74 cents, or 13 percent, to $5.08 after the nation's largest thrift reported a $3 billion loss due to increases in its loss reserves to cover souring loans in its mortgage portfolio.

Costco Wholesale Corp. warned that its fiscal fourth-quarter and full-year profits will fall short of Wall Street's expectations. The warehouse club operator expects higher energy costs to hurt its results. The stock fell $7.73, or 11 percent, to $64.26.

Fannie Mae and Freddie Mac advanced as the House planned to vote Wednesday on legislation that would tap the mortgage giants' profits to cover any losses from saving 400,000 homeowners from foreclosure. The measure would give the Treasury Department authority to extend the companies a temporary lifeline. Fannie Mae rose $1.31, or 9.8 percent, to $14.72, while Freddie Mac rose $1.05, or 11 percent, to $10.75.

Ali said the government's action to help Fannie Mae and Freddie Mac has reassured investors that the financial system is not in danger of collapse.

"Things are not blowing up because of Fannie and Freddie still being in business and the financial system still being intact," he said. "I think you're seeing some relief on that."

Still, he remains cautious.

"Some of the biggest rallies happen in bear markets. The outlook for the market is still pretty negative," he said, pointing to a general decline in earnings, a slowdown in international growth, rising prices and a weak dollar.

The Russell 2000 index of smaller companies rose 4.79, or 0.67 percent, to 721.61.

Overseas, Japan's Nikkei stock average rose 0.97 percent. Britain's FTSE 100 added 1.60 percent, Germany's DAX index rose 1.45 percent, and France's CAC-40 jumped 1.88 percent.

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