NEW YORK MARKET: Surge in oil seems unlikely to last

THE rally in oil stocks that helped send the Dow Jones Industrial Average and the Standard & Poor's 500 Index to record highs last week is unlikely to last, money managers say. That could make it all the more difficult for the Dow average to top 10,000, after coming within 42 points of the mark on Friday.

The S&P index of international oil stocks rose 7.8 per cent on Wednesday and Thursday, its biggest two-day advance this decade, on expectations that producers would cut output enough to boost prices. Exxon rose 14 per cent since 2 March, while Texaco jumped 22 per cent and Mobil added 16 per cent. Still, money managers weren't optimistic that the stocks would be able to hold their gains.

"It's a short-term event," said Robert Froehlich, fund manager at Scudder Kemper Investments. "The fundamental price of oil is driven more by demand than supply, and we have an overabundance of oil." Crude topped $15 (pounds 6.15) a barrel for the first time in five months as Opec oil producers agreed to idle almost 3 per cent of world output. Investors remain concerned that supplies are too high to justify such a big gain. "We have been down this road before, and I am not convinced oil stocks have more room to rise," said Bryan Piskorowski, analyst with Prudential Securities.

For the week, the Dow industrials gained 1.4 per cent, the S&P 500 added 1.5 per cent, and the Nasdaq 1.9 per cent. Many are forecasting that the Dow will slip in coming days. "Our models suggest if we go through 10,000, it could be a long wait for 11,000 - or we may drift down," said Douglas Cliggott, a strategist with JP Morgan. He maintains his year-end target of 9,300 for the Dow.

"For those of us who work in the markets, it's just another day," said John Bartlett, senior portfolio manager for Commerce Funds in St. Louis. Still, Commerce Funds is reducing the equity allocation in its balanced portfolio to 55 per cent from 60 per cent and increasing the bond portion to 45 per cent from 40 per cent on lingering concern that prices are too high relative to earnings.

The earnings growth that could justify higher share prices may not be on the horizon. Some of the companies that propelled the S&P 500 and Nasdaq higher have been issuing sales warnings. Oracle reported unexpectedly weak sales growth and Microsoft said it expects sales to fall short of estimates in its current quarter because of a delay in the introduction of Office 2000.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system