Stocks jump as crude drops

NEW YORK -- Wall Street shook off early doldrums and closed sharply higher Tuesday after another drop in oil prices encouraged investors to set aside financial sector worries and go bargain hunting across the market.

The Dow rose 135.16, or 1.18 percent, to 11,602.50.

Stocks initially fell on uneasiness about the continuing impact of the housing market downturn and the credit crisis on financial company earnings. But a $3 drop in oil -- which took crude's decline in recent weeks to nearly $20 a barrel -- persuaded some investors to wade back into equities.

The focus on higher oil's impact on the economy has been so intense that any notch lower breeds optimism that the commodities run-up might perhaps be nearing an end, analysts said. That means, for the moment, corporate earnings reports have lost some of their dominance of the market.

Oil prices fall more than $3 a barrel

NEW YORK -- Oil prices tumbled more than $3 a barrel Tuesday as Tropical Storm Dolly grew increasingly unlikely to threaten supply, giving traders one less reason to buy as a strengthening dollar helped keep prices in check.

The sell-off was a throwback to last week's sharp declines, and dragged crude to its lowest level since early June. It was oil's fifth decline in the last six sessions.

Light, sweet crude for August delivery fell $3.09 to settle at $127.95 a barrel in its last trading day on the New York Mercantile Exchange. Earlier the contract, which will be replaced by September crude today, dropped as low as $125.63.

Yahoo 2Q profit falls 18 percent

SAN FRANCISCO -- Yahoo Inc.'s second-quarter profit fell 18 percent, the latest sign of the financial decay that has frustrated shareholders and raised doubts about the Internet company's future.

But while the results released Tuesday missed analyst expectations, the performance wasn't as bad as many investors had feared after Internet search and advertising leader Google Inc.'s second-quarter earnings disappointed Wall Street last week.

Yahoo earned $131 million, or 9 cents per share, from April through June, compared with $161 million, or 11 cents per share, at the same time last year.

Ford to retool plants to make smaller cars

DETROIT -- Ford Motor Co. plans to revamp some U.S. plants and bring six small vehicles to the U.S. market from overseas to meet customers' growing demand for more fuel-efficient options, a person briefed on the company's plans said Tuesday.

Ford has no immediate plans to close U.S. plants despite overcapacity in a slumping market, the person said. Instead, the automaker will retool plants to increase production of smaller cars and engines. The person requested anonymity because Ford isn't confirming details until Thursday, when it releases second-quarter earnings.

The moves will further accelerate Ford's efforts to ease its dependence on trucks, sport utility vehicles and vans, which accounted for 45 percent of its sales in the first half of this year. Ford's U.S. sales dropped 14 percent in the first six months of 2008 as consumers shocked by rising gas prices sought smaller vehicles.

UPS reports 21 percent profit decline

ATLANTA -- Customers are using UPS shipping services within the U.S. less amid a slumping U.S. economy and soaring fuel prices. The company's international business was affected as imports into the country declined in the second quarter.

As it reported a nearly 21 percent profit decline in the April-June period and lowered its outlook for the year, United Parcel Service Inc. said Tuesday it was working to cut costs. Even so, company officials said the Atlanta-based company has the financial wherewithal to steer through the rough patch. UPS shares rose more than 4 percent in Tuesday trading.

UnitedHealth sees stock jump

Health insurers battered by rising costs and employer benefits cuts caught a break Tuesday when UnitedHealth Group beat Wall Street expectations and saw its stock jump nearly 8 percent, even though it reported a sharp drop in second-quarter profit.

Shares of the Minneapolis-based managed-care provider rose to $25.70 from Monday's closing price of $23.83, as the prices of other publicly traded insurers like Aetna Inc. and WellPoint Inc. also jumped several percentage points.

UnitedHealth's net income fell to $337 million, or 27 cents per share, from $1.23 billion, or 89 cents per share, a year ago. Hefty lawsuit settlements and thinner margins in its health care services business contributed to the profit drop.

------

Senate moves ahead with oil speculation bill

WASHINGTON (AP) -- The Senate voted Tuesday to move ahead with a Democratic plan to curb speculation in oil markets that has been blamed for some of the recent run-up in oil prices.

The 94-0 vote clears a procedural hurdle for the legislation, which would require the Commodity Futures Trading Commission, or CFTC, to set limits on trading in oil markets by investors and speculators.

Despite the big tally, however, the parties remain bitterly divided on how to address high gasoline prices. Republicans say the bill would have little if any effect and instead want a ban on offshore drilling lifted. Also, a federal task force said in an interim report that supply and demand factors are most likely to blame for the sharp run-up in oil prices. By The Associated Press

The Dow rose 135.16, or 1.18 percent, to 11,602.50. The blue chip index rose 400 points last week, but ended Monday's session slightly lower.

Broader indexes also rose Tuesday. The Standard & Poor's 500 index jumped 17.00, or 1.35 percent, to 1,277.00. The technology-dominated Nasdaq composite index, which was down for much of the session on tech earnings disappointments, ended up 24.43, or 1.07 percent, at 2,303.96.

Light, sweet crude for August delivery fell $3.09 to settle at $127.95 a barrel in its last trading day on the New York Mercantile Exchange.

In other Nymex trading, heating oil sank 6.97 cents to settle at $3.6782 per gallon, while gasoline futures tumbled 7.01 cents to settle at $3.147 per gallon.

In London, September Brent fell $2.27 to settle at $129.55 a barrel on the ICE Futures exchange.