U.S. Stocks, Oil soar; Dollar, Bonds Rise

NEW YORK, Aug 19 (Reuters) - U.S. stocks on Monday rallied to close at five-week highs, while oil surged to near $30 a barrel on the belief OPEC will keep output curbs in place.

The dollar caught a strong head wind from stocks, rising against both the euro and Japan's yen on a quiet day.

Bonds recovered from last week's slide against a backdrop of scant economic news and rose across the yield curve, in spite of the buoyant stock market.

In New York, crude oil futures prices jumped after Kuwait's acting oil minister, Sheik Ahmad al-Fahd al-Sabah, said he did not expect the Organization of Petroleum Exporting Countries to increase production when it meets in Japan next month.

On Wall Street, good news on the earnings front for retailers like home improvement giant Lowe's (LOW,Trade) and Toys R Us (TOY,Trade) prompted investors to buy stocks.

An earnings upgrade of Nokia (NOK,Trade), the world's largest mobile telephone maker, stirred investors' interest in the beaten-down shares of tech and telecom companies.

"The market has a bias to the upside because it has been so bad for so long," said Erik Gustafson, portfolio manager at Stein Roe & Farnham, adding that investors had begun to put aside their concerns about questionable corporate accounting.

Both the Dow and the S&P 500 closed at levels unseen since July 9. Last week, the S&P 500 chalked up its fourth- consecutive winning week -- the longest winning streak in about 15 months.

The blue-chip Dow Jones Industrial average ((.DJI)) gained 212.73 points, or 2.42 percent, to 8,990.79, while the broader Standard & Poor's 500 Index ((.SPX)) added 21.93 points, or 2.36 percent, to 950.70, according to the latest available data.

The technology-laced Nasdaq Composite Index ((.IXIC)) rose 33.53 points, or 2.46 percent, to 1,394.54. Microsoft Corp. (MSFT,Trade), one of the biggest names traded on Nasdaq and one of the 30 Dow stocks, rose $2, or 4 percent, to $52.

Lowe's, the No. 2 U.S. home-improvement retailer, rose $4.21, or 11.4 percent, to $41. Lowe's said profit rose 42 percent, lifted by cost controls and aggressive expansion into lucrative metropolitan U.S. markets. Home Depot, the No. 1 retailer in the home-improvement sector and one of the 30 stocks in the Dow average, rose 93 cents to $29.03.

Toys R Us stock jumped $1.08, or 8.4 percent, to $13.90 after the toy retailer reported a smaller-than-expected loss. Leaner inventories and growth in core toy sales helped the bottom line, the Paramus, New Jersey-based company said.

Wal-Mart Stores Inc. (WMT,Trade), the world's largest retailer, said back-to-school sales in August have been slow due to warm weather and sales at stores open at least a year -- same-store sales -- are at the low end of its forecast for a rise of 4 percent to 6 percent for the month.

But slow sales did not dampen enthusiasm for Wal-Mart shares, which rose 90 cents to $54.69 and helped the Dow.

A positive tone for tech and telecom stocks was set when U.S. brokerage Gerard Klauer & Mattison upgraded its investment rating on Finnish telecoms giant Nokia Corp. ((NOK1V.HE))(NOK,Trade) -- to "outperform" from "neutral." Shares of Nokia, the world's largest mobile telephone maker, rose 5.2 percent, or 71 cents to $14.29 on the New York Stock Exchange.

The Conference Board said its U.S. index of leading economic indicators fell 0.4 percent in July, the largest decline since a 0.6 percent drop in the aftermath of the Sept. 11 attacks on the United States.

Instead, investors accentuated the positive as worries about corporate shenanigans appeared to have subsided somewhat. The Aug. 14 deadline for top executives at about 700 companies to vouch for the accuracy of financial statements, helped dispel some of that concern, analysts said.

"The sign-offs on corporate accounting, although well known by now, are helping," said Gary Wedbush, head of trading at brokerage Wedbush Morgan. "There's some renewed confidence in the numbers out there and the Nasdaq consists of the stocks most beaten down and the most suspect in terms of numbers."

The drop in the U.S. July index of leading indicators helped Treasury prices early in the day.

At the 5 p.m. New York close, two-year notes ((US2YT=RR)) were up 3/32 at 100-2/32, taking their yield down to 2.21 percent from 2.26 percent on Friday. Benchmark 10-year notes ((US10YT=RR)) rose 10/32 to 100-23/32, yielding 4.29 percent, down from 4.33 percent on Friday.

At the long end, 30-year bonds ((US30YT=RR)) gained 19/32 to 104-26/32, for a yield of 5.05 percent. That was up from a nine-month low of 4.84 percent last week.

In late currency trading, the euro fell to 97.59 cents from 98.39 cents late on Friday. The dollar rose to 118.55 yen from 117.56 yen at Friday's close.

On the New York Mercantile Exchange, crude oil for September delivery rose 51 cents, or 1.7 percent, to settle at $29.84 a barrel. Earlier, September crude hit the day's peak at $29.95, the highest since $29.98 on Sept. 14, 2001.

The day's rally in the oil markets extended a rise of more than $2 last week made on fears of a possible military strike by the United States against Iraq and a steep slide in U.S. crude stocks to the lowest levels in 17 months.

In London, the blue-chip FTSE-100 index ((.FTSE)) rose 96.8 points, or 2.24 percent, to finish at 4,426.8, its highest in 5-1/2 weeks, partly on the strength of mobile group Vodafone Plc ((VOD.L)) In Tokyo, the benchmark Nikkei 225 average ((.N225)) fell 189.03 points, or 1.93 percent, to end at 9,599.10.

Both the Dow and the S&P 500 closed at levels unseen since July 9. Last week, the S&P 500 chalked up its fourth- consecutive winning week -- the longest winning streak in about 15 months.

I bet Daschle and Gephardt are in tears. Let's hope the rally continues through Nov.

Wow, and as I said for two years. I still think the DOW will hit bottom between 6,000 and 7,200. That would only be an adjustment.

I'm long on crude - and $40/bbl sounds good to me - I know its at your expense but you'll have to forgive my greed - need to catch up and if it's stick it to my neighbors then so be it.

I'm long on crude - and $40/bbl sounds good to me..

Crude is up because the US is filling the Strategic Reserve with large purchases in Sept. and Jan.

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