US stocks advance as oil pulls off fresh high

NEW YORK - Stocks rose Monday, the final session of an arduous first half, as the price of oil pulled off its high and relieved some inflation worries.

The price of oil has held sway over stocks for months. As it has in many recent sessions, the Dow Jones industrial average moved inversely to the price of crude. The Dow's occasional declines early in the session had left the index off 20 percent from its high in October, putting the blue chips officially in bear market territory. But stocks gained momentum as oil fell by several dollars and investors felt justified in hunting for bargains after last week's steep sell-off.

Light, sweet crude moved above $143 per barrel for the first time early Monday before pulling back sharply to $140.30, up 9 cents, on the New York Mercantile Exchange.

Rising prices have pressured stock markets worldwide because of worries that inflation will force consumers and businesses to pare spending, which would hurt economic activity. In the U.S., consumer spending accounts for more than two-thirds of economic activity so a sharp pullback would prove particularly damaging.

With Monday as the last day of the second quarter, institutional investors could be looking to make any changes that will put the best light on battered portfolios.

The Dow's 10.2 percent decline this month as of Friday's close leaves the index on pace for its worst June since the Depression. In June 1930, the Dow logged a 17.2 percent drop.

"When you have this type of slipping in and out of the plus and minus column — usually that's an indication that the market is trying to stabilize. But I think we're going to need capitulation for the market to begin to stabilize," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc.

In midday trading, the Dow rose 73.28, or 0.65 percent, to 11,419.79.

Broader stock indicators also rose after declining in the early going. The Standard & Poor's 500 index rose 10.72, or 0.84 percent, to 1,289.10, and the Nasdaq composite index rose 5.02, or 0.22 percent, to 2,320.65.

Bond prices slipped. The yield on the benchmark 10-year Treasury note, which tends to move opposite its price, rose to 3.98 percent from 3.97 percent late Friday.

The dollar was mixed against other major currencies, while gold prices rose.

Cardillo contends that the market must first see nervous investors pull more money from the stock market before Wall Street will begin to show meaningful signs of stabilizing. He said the coming earnings reports for the second quarter could indicate that while some parts of the economy, like the financial sector, are struggling, others might show decent earnings.

"With the Dow nearing bear market territory it's going to keep investors on edge," he said. He's looking at economic data due this week on manufacturing and employment as possibly offering some reassurance to investors.

"I think the economic data is going to indicate an economy that is not slipping into a full-blown recession but one that is just limping along," Cardillo said.

The Chicago Purchasing Managers' report on manufacturing, which tracks business conditions across Illinois, Michigan and Indiana, rose to 49.6 for June from 49.1 in May. However, a reading below 50 signals economic contraction.

In corporate news, H&R Block Inc. swung to a fourth-quarter profit from a loss following a strong tax season and the sale of the company's troubled mortgage business. The nation's largest tax preparer issued a full-year profit forecast that topped Wall Street's estimate. The stock rose 77 cents, or 3.7 percent, to $21.59.

A Keefe, Bruyette & Woods Inc. analyst reduced her financial forecast and price target for Merrill Lynch & Co. because of expectations that the investment bank will book further write-downs of securities related to mortgages. Merrill slipped 4 cents $32.66.

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