Stocks Up as Wal-Mart Boosts Sales Forecast

An improving sales outlook at retail giant Wal-Mart Stores sent stocks higher Tuesday as investors, also cheered by a jump in factory orders, looked past another uptick in the price of oil.

Wal-Mart raised its sales projection for June to the highest level since May 2004. That means “2% of the economy is coming out and saying their sales are better than forecast,” said John Lynch, chief market analyst at Evergreen Investments. “That’s the best news of the day.”

Investors also latched on to the strongest increase in factory orders in 14 months. Although most of the May gain reflected demand for airplanes and parts, some analysts saw signs that the broader manufacturing sector was stabilizing.

The Dow Jones industrial average rose 68.36 points, or 0.8%, to 10,371.80.

Broader stock indicators were also higher. The Standard & Poor’s 500 index gained 10.55 points, or 0.9%, to 1,204.99, and the Nasdaq composite rose 21.38 points, or 1%, to 2,078.75.

Advancing issues led decliners 2 to 1 on the New York Stock Exchange.

As investors and traders returned from the long holiday weekend, many were buying the stock sectors that performed best in the first half of the year.

Small and mid-size stocks were particularly in demand. They had outperformed blue chips in the first half.

The S&P; 600 index of small stocks and the S&P; 400 index of mid-size stocks both hit record highs. The S&P; 600 jumped 5.11 points, or 1.5%, to 340.08 and the S&P; 400 rose 6.64 points, or 1%, to 696.53.

Stocks may be helped by “a developing consensus on Wall Street that the market is poised to have a better second half of the year,” said Tim Connors, a money manager at Delaware Investments in Philadelphia.

Treasury yields rose on the strength in factory orders, which reinforced views that the Federal Reserve can continue ratcheting up short-term interest rates. The yield on the benchmark 10-year T-note rose to 4.11%, from 4.04% on Friday (all U.S. markets were closed Monday). Bond yields rise as their prices decline.

The bond market “is beginning to realize that the economic data is not as weak as was priced in and that the Fed is not at a point where they are going to pause anytime soon,” said Sharon Stark, chief fixed-income strategist at Legg Mason Wood Walker in Baltimore.

The dollar, which hit a 13-month high against the euro in overseas trading Monday, retreated from that level Tuesday but was still higher compared with its level before the Fourth of July weekend in the U.S. The euro traded at $1.191, down from $1.195 on Friday.

Wal-Mart’s news was particularly comforting to Wall Street because the retailer and a number of other discounters had attributed sluggish spring sales gains partly to higher gas prices that limited consumers’ ability to spend on non-necessities. The upbeat outlook allowed investors to shrug off oil’s higher price.

Crude oil futures rose on persistent fears that heating oil supplies would run short this winter and that aging refineries would have to push production levels to the limit. A barrel of light crude settled at $59.59, up 84 cents, in New York trading.

Stocks had pulled back in late June as crude hit new highs, but some analysts say investors have been putting too much emphasis on oil prices.

“Energy is 10% of business costs,” Lynch said. “Wages are a bigger concern; they’re 70% of business costs.” Investors who watch wages for signs that they’re on the upswing are waiting for labor cost data in the second-quarter productivity report, to be issued late this month.

In other market highlights:

* Wal-Mart was up $1.52, or 3.2%, at $49.80. Other retailers gained on the news; J.C. Penney Co. rose 94 cents to $54.05, Federated Department Stores surged $2.23 to $75.59 and Gap climbed 44 cents to $20.26.

* Higher oil prices helped boost shares of energy-related companies. Exxon Mobil advanced $1.83 to $60.14, ConocoPhillips added $2.14 to a record $61.24 and Schlumberger jumped $2.21 to $78.82.

* Real estate investment trust shares continued their strong second-quarter performance. A Bloomberg News index of 147 REIT shares rose 2.27 points, or 1.1%, to a record 203.49. Los Angeles-based Arden Realty gained 82 cents to $36.92; Boston Properties rose 73 cents to $71.72.

* The strong dollar sent gold prices lower and slammed gold mining stocks. Near-term gold futures fell $4.90 to $422.90 an ounce in New York. Among mining issues, Barrick Gold slumped $1.10 to $24.18, Glamis Gold tumbled 95 cents to $16.25 and Placer Dome slid 64 cents to $14.75.