US stocks rise on falling oil prices

A barrel of light crude settled at 43.31, down 68 cents, on the New York Mercantile Exchange.

Wall Street also moved higher on Friday’s jobs report, which was overlooked in last week’s very light trading and overshadowed by Intel Corp’s disappointing mid-quarter report.

The Labour Department reported a 0.1% point drop in the unemployment rate and the creation of 144,000 new jobs.

“The market is rallying on the jobs report and the fact that the price of oil is heading lower,” said Peter Cardillo, chief strategist and senior vice president at SW Bach & Co. “If we break 40 a barrel on oil and keep the jobs coming, we could see a substantial rally in stock prices this month.”

The Dow Jones industrial average rose 80.96, or 0.8%, to 10,341.16, its highest close since June 30.

Broader stock indicators rose moderately. The Standard & Poor’s 500 index was up 7.67, or 0.7%, at 1,121.30, and the Nasdaq composite index gained 14.08, or 0.8%, to 1,858.56.

While volume on the major markets rose substantially after last week’s record lows, many investors remained on the sidelines, awaiting Federal Reserve chairman Alan Greenspan’s testimony before Congress on Wednesday, where he was expected to give his view on the strength of the economic recovery.

“I think Greenspan will stick to his mantra of a measured pace of interest rate hikes,” said John Lynch, chief market analyst at Evergreen Investments. “We’re transitioning from the spectacular growth of the past year to more boring, but still important, growth, and the interest rate policy has to reflect that.”

Investors seemed to discount the impact that the summer’s skyrocketing oil prices would have on third-quarter earnings, even as the usual round of warnings and pre-announcements begin in earnest this week. Analysts said that while oil would be a factor, along with more difficult year-over-year comparisons, earnings overall should remain positive, with double-digit earnings growth expected.

A serious rally, however, may be postponed until after the presidential elections, or at least until a clear front-runner is established, Lynch said. “As we all know, the market hates uncertainty, and the election situation is still too uncertain for anybody to make a bet right now,” he added.

Most industry sectors enjoyed gains today, with mining and construction stocks leading the market.

Shares of oil producers and oil equipment makers fell as crude oil futures dropped, while semiconductors suffered more losses in the wake of Intel’s mid-quarter announcement.

Pressure on semiconductors grew more intense as Lehman Brothers cut its ratings on Intel and National Semiconductor Corp to “equal weight” from ”overweight,” citing low demand for computer chips. Intel dropped 16 cents to 19.89, while National Semiconductor slipped 75 cents to 12.42.

After disappointing sales over the past three months, Wal-Mart Stores Inc. reported that its same-store sales – comparing stores that have been open for at least a year – were expected to rise 2-4% in September, bolstered by last-minute back-to-school spending. Wal-Mart shares were up 4 cents at 53.29.

Circuit City Stores rose 6 cents to 13.70 after announcing that its sales were up 2.9% in the second quarter. The electronics retailer was scheduled to announce its full second-quarter results on September 17.

Embattled airline US Airways Group fell 30 cents to 2.05 after its pilots’ union rejected the company’s latest contract proposal.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.21 billion shares, compared to 921.82 million on Friday.

The Russell 2000 index of smaller companies was up 6.69, or 1.2%, at 562.93.