The Dow and S&P 500 rose on Friday, as sinking commodity prices raised hopes of a consumer spending recovery, helping push shares of retailers higher. A rally in the US dollar on fears about slowdowns in economies outside the United States pushed the price of oil down to a 15-week low.
Further fuelling the retail rally, Kohl's Corp raised its full-year forecast, saying it would be able to weather a tough economy. J.C. Penney Co Inc's shares also rose sharply after it reported earnings that beat Wall Street's expectations.
"The further decline in oil prices is definite support for the consumer and definite support for the economy," said Alan Gayle, senior investment strategist at RidgeWorth Investments in Atlanta. The Dow Jones industrial average rose 43.97 points, or 0.38 percent, to 11,659.90. But for the week, the Dow finished down 0.6 percent. The Standard & Poor's 500 Index gained 5.27 points, or 0.41 percent, to 1,298.20, and inched up 0.1 percent for the week.
The Nasdaq Composite Index slipped 1.15 points, or 0.05 percent, to 2,452.52 on Friday. But for the week, the Nasdaq ended up 1.6 percent. Trading was choppy in thin volume as options expiration added to the session's volatility, analysts said.
Big manufacturers and airlines, whose earnings take a hit when fuel costs rise, gained. A report showing a surprising rise in manufacturing in New York state in August added to the positive sentiment. Energy and commodity-related companies' shares, including Exxon Mobil, fell, however, dragging on the broader market. Freeport-McMoRan Copper & Gold shares fell 2.8 percent to $84.39 on the New York Stock Exchange.
"Equities are liking the decline in oil and they are liking the stronger dollar. That said, the dollar is rallying on bad news overseas as opposed to good news here in the US," Gayle added.
The price of oil fell $1.24, or 1.1 percent, to settle at $113.77 a barrel. Commodity markets tumbled across the board, with gold sinking below $800 an ounce to almost a nine-month low as evidence mounted that slowing economic growth was hitting global demand.
An index of S&P retail shares rose 1.8 percent. Kohl's shares gained 7.3 percent to $51.79. Department store operator J.C. Penney Co Inc's shares rose 8.4 percent to $39.94 after its earnings report, even though it, like apparel retailer Abercrombie & Fitch, gave a cautious forecast. Michael James, a senior trader at regional investment bank Wedbush Morgan in Los Angeles, noted that investors were looking past the weaker-than-expected forecasts from J.C. Penney and clothing retailer Abercrombie & Fitch, given the continued decline in the price of oil.
An index of airline stocks jumped 4.5 percent. Among big manufacturers, United Technologies rose 1 percent to $66.80. Shares of Autodesk Inc surged 11.7 percent to $38.37 and gave the biggest boost to the Nasdaq 100 after the engineering software maker posted a quarterly profit that was slightly above its own forecast.
Shares of MBIA Inc and Ambac Financial Group jumped on news that Standard & Poor's is no longer reviewing the ratings on the insurance arms of both companies for downgrade. MBIA shares shot up 8.7 percent to $11.22, while Ambac skyrocketed 24.6 percent to $5.68.
US consumer sentiment improved slightly in early August, thanks to a drop in gasoline prices as inflation expectations improved, data showed on Friday. Trading volume was low on the New York Stock Exchange, with about 1.17 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.79 billion shares traded, also below last year's daily average of 2.17 billion. Advancing stocks outnumbered declining ones by about 16 to 15 while on the Nasdaq, decliners beat advancers by about 15 to 14.
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