Energy, finance stocks climb

Energy and financial shares rallied on prospects for higher earnings yesterday, carrying the U.S. stock market mostly higher for a second consecutive day.

Exxon Mobil Corp., the largest crude-oil producer, helped lift the Standard & Poor's 500 index and Dow Jones industrial average after energy prices rebounded. Morgan Stanley, Lehman Bros. Holdings Inc. and the Goldman Sachs Group Inc. climbed on expectations new securities regulations will help bolster the banks' earnings in the second half of 2007.

The Nasdaq composite index dropped for the fourth time in five days, led by Apple Inc.

"We still think that stocks have room to rally," said Sean Clark, who helps manage about $1.3 billion as chief investment officer at Clark Capital Management Group Inc., of Philadelphia. "Valuations are very palatable . . . for the market and stocks are cheap relative to bonds."

The S&P 500 gained 1.45, or 0.1 percent, to 1,509.12. The Dow average increased 0.57 to close at 13,424.96. The Nasdaq composite index lost 1.39, or 0.1 percent, to 2,572.15.

"Energy is leading the way again, the bull market seems intact to me," said Tom Wirth, who manages $1.8 billion as senior investment officer at Chemung Canal Trust Co., of Elmira, N.Y. "In the long run, the M&A activity is maintaining a floor on the market."

Energy shares rose 0.7 percent for the second-biggest gain in the S&P 500 after oil for July delivery rose $1.21 to $65.97 a barrel in New York. Exxon added 38 cents to close at $83.06. ConocoPhillips, the second-largest U.S. refiner, rose 58 cents to close at $77.87.

Morgan Stanley, Lehman Bros. and Goldman Sachs led financial shares higher. Analysts say the biggest U.S. securities firms may show higher profits in the second half of the year after a rule change that allows them to hold less money in reserve for potential losses.

Wall Street firms are expected to post the slowest earnings growth in two years when they report second-quarter results.

General Motors Corp. climbed 77 cents, to $31.77, the steepest gain in the Dow average.

Ford advanced 16 cents to close at $8.40. The second-biggest U.S. carmaker is seeking buyers for its Volvo, Jaguar and Land Rover brands in Europe, two people familiar with the strategy said.