Oil eases on talk of a production hike, boosting hopes for the economy

© Mike Keefe/Denver Post
New York - U.S. stocks hit session highs midmorning Tuesday, led by bank and industrial shares, as a tick down in crude prices shifted investor attention to a stronger U.S. economy.

The Dow Jones industrial average gained 80.27 points, or 0.66 percent, to 12,170.30. The Standard & Poor's 500 Index rose 8.15 points, or 0.62 percent, to 1,318.28. The Nasdaq Composite Index added 16.60 points, or 0.60 percent, to 2,762.23.

Earlier, stocks had seesawed in early trading Tuesday as oil prices pulled back on prospects of an OPEC production hike after recent turmoil in the Middle East and North Africa.

Oil fell $1.22 to $104.22 a barrel after Kuwait's oil minister said that OPEC members are in informal talks about raising oil output. They have yet to make any decisions about changing supplies.

Equities have been closely tied to oil prices recently, as investors worried that consumer spending may be curtailed by higher oil and gas prices, choking off an economic recovery.

Rebels fighting to overthrow Muammar Gaddafi have rejected an offer from the Libyan leader to negotiate his exit, even as they battled to hang on to early gains in the revolt.

"Clearly what investors are hoping for is, the Libya situation resolves, hopefully with Gaddafi leaving, and that oil shipments resume. There is a pretty big fear premium in the price," said Rick Meckler, president of LibertyView Capital Management in New York.

"To the extent that fear is taken out, you could see prices drop back to at least a level which doesn't thwart the recovery."

Boeing Co sealed deals worth $10 billion with two airlines in China, the world's fastest growing market, and could lead to orders for more than 2,000 aircraft over the next five years.

Consumer electronics retailer Best Buy Co Inc said its China strategy will focus on expanding into inland cities, where consumption is booming and manufacturing groups are shifting production.

European shares gained Tuesday, recovering from two days of losses as concerns over the impact of high crude prices on the economy eased.

Japan's Nikkei benchmark edged higher as investors covered short positions after selling heavily Monday, but analysts said gains may be limited on concerns about turmoil in the Middle East and high oil prices.

The Associated Press and Reuters contributed to this report.