Financials Push Stocks Up as Oil Tumbles

Stocks turned higher, pushed upward by credit card companies and others in the financial sector as oil tumbled from its stratospheric heights.

Heading towards 2 pm ET major indexes each were posting solid gains. Tepid growth in gross domestic product and an unexpected surge in unemployment claims held stocks back early, while the drop in crude supplies briefly stunned the market and saw oil prices gain. But that move quickly reversed itself.

The Dow pushed past a 100-point gain while the Nasdaq added more than 1 percent.

Shares gained sharply for Visa, Mastercard and American Express on a report that US consumers were using their credit cards more.

Financials were broadly higher, with gains also posted by Morgan Stanley and Lehman Brothers among others. Countrywide Financial led S&P gainers after the positive financial news from the troubled mortgage lender gave investors confidence that its acquisition by Bank of America, which was among the Dow leaders, would be completed.

Pharmaceuticals helped boost the tech-heavy Nasdaq, on news that Bristol-Myers Squibb plans to buy Kosan Biosciences, whose shares gained more than 200 percent on the news.

The Dow was led by telecomms, which were up more than 2 percent, led by AT&T.

Shares of major energy producers, particularly Sunoco , were all lower.

Oil surged after the 10:30 am report on crude stocks, but quickly surrendered gains and fell more than $4, below $127 a barrel. Dollar-denominated commodities did poorly overall as the US currency staged a rally fueled largely by talk of an interest rate increase.

The Federal Reserve may need to contemplate rate rises to fight inflation, even as the US economy is still weak, two Fed policy-makers warned, lending weight tomarket suspicions that rate cuts were over.

Several retailers reported as first-quarter earnings season wound down, with Big Lots scoring a Big Gain on a 20 percent increase in sales, while Sears Holdings fell after it reported an unexpected loss caused by slower sales at Kmart and Sears stores.

Also, shares of equipment manufacturer Joy Global gained after its first-quarter earnings were ahead of analyst estimates, even though profit fell 7 percent.

On the downside, Alfacell stock dropped more than 44 percent after the Somerset, NJ-based pharmaceutical said its lead drug candidate failed to improve the survival rate of patients with a special type of cancer. The company said it still plans to seek federal approval for the drug based on positive results for a secondary goal.