Stocks Rally as Oil Prices Weaken

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<h2><font color=#003399>Stocks Rally as Oil Prices Weaken</font></h2>
NEW YORK (Reuters) - U.S. stocks jumped on Tuesday after a drop in crude oil prices soothed investors' worries about the impact of high energy costs on the economy, while the Standard & Poor's 500 Index surpassed 1,100, a key level.

Health-care companies Johnson & Johnson and Boston Scientific Corp. led gainers on the S&P 500. But SBC Communications Inc. restrained the blue-chip Dow after the phone company and a union representing thousands of workers reached a tentative new contract.

Crude oil fell sharply in midafternoon trading on the New York Mercantile Exchange on forecasts that U.S. inventories rose in the week to last Friday, traders said.

A lower oil price "is a huge catalyst, coupled with the fact we broke through 1,100 on the S&P, which is a very bullish sign and the first time that happened in about a week," said Michael O'Hare, head of block trading at Lehman Brothers. "Once it consolidated up there, we saw institutional money come in."

The Dow Jones industrial average rose 103.98 points, or 1.04 percent, to 10,062.41, while the broader S&P 500 Index gained 12.28 points, or 1.12 percent, to 1,107.69. The technology-laced Nasdaq Composite Index tacked on 26.63 points, or 1.38 percent, to 1,949.61.

"Declining oil obviously helps. But it's very light volume today, and as we get closer to the holiday weekend, we're going to find less and less participants," said John O'Donoghue, co-head of listed trading at Credit Suisse First Boston.

Most U.S. financial markets will be closed Monday for the Memorial Day holiday, traditionally seen as the start of the summer vacation season.

NYMEX July crude fell 60 cents to $41.12 a barrel, sharply down from an overnight high of $41.83 and a 21-year NYMEX record of $41.85 set on May 17.

However, analysts said oil prices could still test new highs on concerns that any increase in output from Saudi Arabia would not be enough to meet rising global demand.

Boston Scientific shares rose $2.54, or 6.8 percent, to $40.03. The company said a study of its Taxus drug-coated stent showed the product was safe and effective in higher-risk patients after nine months.

Johnson and Johnson shares rose $1.17, or 2.15 percent, to $55.48.

Other stocks lifting the S&P 500 were Citigroup Inc., up 93 cents, or 2.1 percent, at $46.30, and American International Group, up $1.54, or 2.2 percent, at $71.33.


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