Sinking oil prices ignite stock gains

0 Comments | USA TODAY, July, 2008 | by Adam Shell

NEW YORK -- Stocks on Tuesday erased the sizable 2% loss suffered a day earlier as oil prices fell to their lowest levels since May and investors reacted positively to moves by Merrill Lynch to rid itself of toxic mortgage securities.

The Dow Jones industrial average rose 266.48 points, or 2.4%, to 11,397.56, wiping out all of Monday's 240-point, or 2.1%, drop. That reduced the Dow's fall from its October high to 19.5%, allowing it to climb out of bear market territory.

The Standard & Poor's 500 index rallied 28.83 points, or 2.3%, to 1263.20. The Nasdaq composite index jumped 55.40 points, or 2.5%, to 2319.62.

Oil settled down $2.54 to $122.19 a barrel, which translates into a 15.9% drop from its July 3 closing high of $145.29. During Tuesday's...