Insurer Shares Lead Rebound on Wall Street

Wall Street rebounded Tuesday, led by shares of insurers, steel makers and utilities, as the dollar stabilized and investors hunted for bargains after three weeks of losses.

Buyers ignored another rise in oil and natural gas prices.

The Dow Jones industrial average jumped 138.49 points, or 1.4%, to 9,888.48, the first gain for the blue-chip index in six sessions. It was the biggest percentage advance since June 7.

The broader market also rallied. The Standard & Poor’s 500 index rose 16.29 points, or 1.5%, to 1,111.09, and the Nasdaq composite added 14.75 points, or 0.8%, to 1,928.79.

Winners topped losers by 2 to 1 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading was heavy.

Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds, said the rebound was spurred in part by a “relief rally” in the insurance sector, which has been hammered this month by New York Atty. Gen. Eliot Spitzer’s charges of fraudulent sales practices in the industry.

Leading insurance broker Marsh & McLennan unveiled a reform package that could set the scene for industrywide changes. Marsh shares rose $2.45 to $28.87. They had plunged 43% from Oct. 14 through Monday.

Insurance giant American International Group, one of the 30 Dow stocks, soared $4.23 to $60.33 -- providing a big lift for the index.

Some investors also may have been looking to position their portfolios for a potential rally after the presidential election in one week, analysts said.

But many of the concerns that have hit the market in recent weeks aren’t likely to dissipate soon, experts warn.

The Conference Board on Tuesday said consumer confidence fell this month, its third straight decline.

High energy prices, which have weighed on confidence, aren’t showing signs of cracking. Near-term crude oil futures in New York rose 63 cents to $55.17 a barrel, matching Friday’s record high, as traders continued to focus on low U.S. heating oil inventories.

Natural gas futures jumped 51.2 cents to $8.402 per million British thermal units, their highest price in 20 months. Some forecasters predict a cold winter for the Eastern U.S., which could drain gas reserves.

The recent slide in the dollar also has rattled some investors. A falling dollar could make it more difficult for the U.S. to lure foreign capital and finance its record trade and budget deficits.

But the dollar rose Tuesday against the euro for the first time in 10 sessions. The euro ended in New York at $1.277, down from $1.28 on Monday, after the European Commission cut its growth forecast for 2005, saying record oil prices would damp demand. Europe’s economic growth rate will slow to 2% in 2005, less than the 2.3% predicted in April, the commission said.

The dollar also rose against other major currencies.

In the Treasury bond market yields were modestly higher. The 10-year T-note ended at 4%, up from 3.97% on Monday.

Some traders were disappointed by investor demand at the Treasury’s sale of $12 billion in five-year inflation-indexed notes, which were sold at a yield of 0.95%.

Today the Treasury will sell $24 billion in conventional two-year notes.

Among Tuesday’s highlights:

* In the battered insurance sector, Chubb jumped $4.56 to $69.92, Hartford Financial gained $3.59 to $58.74 and Aon was up $1.90 to $21.54.

* Health insurers also rallied. WellPoint Health climbed $4.67 to $92.90 and Aetna surged $4.49 to $89.30.

* General Electric advanced 73 cents to $33.63 after reiterating its earnings forecast of $1.57 to $1.60 a share for 2004 and 10% to 15% growth in 2005.

* U.S. Steel rose $1.60 to $37.45 after returning to profitability in the third quarter. The company also said it expected a strong fourth quarter.

Steel shares also were bolstered for a second day by expectations of further consolidation in the industry. British steel magnate Lakshmi Mittal on Monday agreed to buy Ohio-based International Steel Group to form the world’s biggest steel maker.

Nucor gained $1.68 to $43.39, Steel Dynamics jumped $2.65 to $35.25 and AK Steel was up 66 cents to $10.25.

* The Dow utility stock index rose 4.16 points, or 1.3%, to 314.54, a three-year high. The high dividend yields on many of the stocks have become more appealing to investors since Congress last year reduced the tax rate on dividend income.

American Electric Power rallied 79 cents to $33.11, Dominion Resources rose $1.38 to $64.90 and Duke Energy gained 56 cents to $24.30.

The average annualized dividend yield of stocks in the Dow utility index is 3.2%.

* Among new stock issues, comparison-shopping website Shopping.com (ticker symbol: SHOP) rocketed on its first trading day, up $10.80 to $28.80.