Stocks rebounded Thursday as crude prices climbed after inventories were pared more than expected.
Stocks had gotten off to a wobbly start as investors juggled a bleak report on new-home sales with any optimism from the unexpected drop in jobless claims and GM's deal with bondholders.
Crude inventories were pared down by 5.413 million barrels last week, well above the 500,000 draw-down expected. The report is typically released on Wednesdays but came out today due to the Memorial Day holiday.
That sent oil stocks higher, including Dow components ExxonMobil and Chevron .
Earlier, OPEC said it will keep output unchangedand instead focus on increased compliance. The organization also demanded that it not be referred to as a cartel anymore.
New-home sales ticked up 0.3 percentto a seasonally adjusted rate of 352,000 in April, but that was well short of the increase economists had expected, and March sales were revised to show a steeper drop than previously reported. The median home price fell nearly 15 percent to $209,700.
Meanwhile, initial jobless claims dropped by 13,000to 623,000 from a slightly revised 636,000. Still, continuing claims rose to another record around 6.8 million.
"With the impact of the Chrysler layoffs dropping out of the [claims] numbers the gradual downward trend is re-emerging," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. "We think claims will drift lower for the foreseeable future but we don't see hiring picking up anytime soon, so payrolls will keep falling," he said.
Durable-goods orders rose 1.9 percent in April, the biggest jump in about a year and a half, but enthusiasm for that gain was tempered by a sharply lower revision for March. That number was originally reported as a 0.8-percent drop, but was revised to show a decline of 2.1 percent.
General Motors surged 13 percent as the automaker reached a debt-for-equity deal with bondholders. Bondholders will start with 10 percent equity, with 7.5 percent more when GM's market cap reaches $15 billion and $30 billion market.
Investors cheered the deal but GM will still likely have to file for bankruptcy protection.
Speaking of which, Ford's largest parts maker, Visteon , filed for Chapter 11 bankruptcy protection for its U.S. operations. Ford shares slipped.
Bank stocks were mostly higher, with JPMorgan and Bank of America among the top gainers on the Dow.
Shares of Procter & Gamble rose even as the maker of Gillette razors and Tide laundry detergent slashed its outlook, projecting 2010 net sales in a range of down 2 percent to up 1 percent.
In other earnings news, Costco Wholesale said its profit fell 29%as the company struggles to pare back its discretionary items and offer more staples.
And Toys R Us said late Wednesday it has acquired rival FAO Schwarz for an undisclosed sum.
The dollar rose broadly on Thursday as yields on 10-year U.S. government bonds jumped more than half a percentage point in the past two weeks, drawing Japanese investors into overseas assets like global semi-conductor stocks, banks and U.S. junk bonds, according to Reuters.
The sharp rise in yields came despite strong demand at the two Treasury auctions this week, which soothed concern over the long-term U.S. credit ratings outlook.
The yield on the 10-Year Note slipped to 3.67 percent early Thursday.
Investors' focus will now turn to the third Treasury Note auction of the week later today, which is the sale of 7-year paper. (Read more about the Wednesday bond yield spike here).
Dallas Federal Reserve President Richard W. Fisher will talk at 6:20 pm New York time on the current economic crisis in Washington.
Time Warner announced plans to spin off its AOL Internet divisionsometime near the end of the year.
Dell shares rose ahead of earnings from the computer maker, due out after the closing bell. Analysts polled by Thomson Reuters expected earnings of 23 cents a share.
Still to Come:
THURSDAY: Weekly crude inventories; Fed's Fisher speaks; Earnings from Dell after the bell
FRIDAY: GDP; Chicago PMI; University of Michigan/Reuters consumer sentiment; earnings from Tiffany
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