A small recovery in commodities and a rally in companies that make consumer staples like toilet paper and pasta helped the financial markets reverse a decline yesterday to end the day with modest gains.

Consumer staples and health care led the market due in part to concerns that high gas prices will erode consumer spending and cut into corporate earnings. Companies that sell everyday items or provide health-related products and services are less dependent on economic growth for their profits since people typically spend money on such items even if they cut back elsewhere. Coca-Cola, McDonald’s and Kraft Foods were among the day’s biggest gainers.

Retail sales rose 0.5 percent, but that number dropped to 0.2 percent after excluding gas prices. Higher energy costs also pushed wholesale prices – the amount companies pay for goods – up 0.8 percent in April, the government said.

“(The market) is watching to see the extent to which higher energy prices crowd out consumption more broadly,” said Andrew Goldberg, a strategist at JP Morgan Funds. If that happens, consumer staples – along with utilities – are typically better investments because their products serve needs, not wants and because they pay higher dividends.

The Dow Jones industrial average gained 65.89 points, or 0.5 percent, to 12,695.92. The S&P 500 added 6.57, or 0.5 percent, to 1,348.65. The Nasdaq composite rose 17.98, or 0.6 percent, to 2,863.04.The Dow Jones industrial average came back from a 93-point deficit earlier in the day.

The Labor Department said applications for unemployment benefits fell last week to 434,000, slightly less than what economists expected. That report also contributed to the early morning market losses.

Crude oil recovered from steep losses earlier in the day and finished nearly 1 percent higher, but remained below US$100 a barrel. Other commodities also recovered. As copper and gold prices went up, materials companies moved higher. Freeport McMoRan Copper & Gold Inc. reversed its losses from the morning and finished nearly 1 higher.

Stock trading has been affected by huge moves in commodities markets over the past two weeks, including a 9 percent drop in the price of oil a week ago and a 27 percent plunge in the price of silver last week. The volatility in commodities and stocks led investors to park money in less risky and more stable assets like government bonds.

Energy companies dropped slightly. ConocoPhillips fell 1.3 percent. A drop in oil prices translates into declining revenues for energy companies.

US government bonds and the dollar both fell as investors became more comfortable holding stocks, commodities and other riskier assets. The dollar fell 0.2 percent against a group of six other currencies, and the yield on the 10-year note rose to 3.23 percent from 3.16 percent late Wednesday. Bond yields rise when their prices fall.

Commodities and stocks have both benefited from the Federal Reserve’s program to boost the economy by buying US$600 billion in Treasury bonds. The Fed’s program had the effect of pushing yields on government bonds lower, encouraging investors to move money into stocks and commodities.

With the Fed’s effort coming to an end in June, the same investments are likely to fall, said Doug Roberts, the chief investment strategist for Channel Capital Research.

“When the Fed pulls back, investors cut back,” Roberts said.

Some well-known companies fell more than the broad markets. Cisco Systems Inc. fell 4.8 percent after the maker of computer networking equipment reported an 18 percent slide in earnings and lowered its profit forecast. It also plans to cut jobs.

Goldman Sachs Group Inc. fell 3.5 percent after it was downgraded by analysts due to a Senate investigation and a Rolling Stone article that argued that the Justice Department should bring charges against the investment bank for defrauding investors.

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OIL rose yesterday in volatile trading to settle near US$99 per barrel, with a weaker dollar offsetting concerns about a slowdown in world demand.

Benchmark crude for June delivery gained 76 cents to settle at US$98.97 per barrel on the New York Mercantile Exchange.

Oil has swung wildly this week – between US$95 and US$104 a barrel – as economists and traders try to gauge how much oil the world will need this year. A weaker dollar boosted oil on yesterday. Crude is traded in dollars, so the price tends to increase as the dollar weakens and makes oil cheaper for investors holding foreign money. The US Dollar Index, which measures the dollar against other major currencies, dropped 0.3 percent in afternoon trading.

At the pump, gasoline rose another 2.2 cents yesterday to US$3.984 per gallon (almost a dollar a liter), according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 19.3 cents higher than a month ago and US$1.088 more than the same time last year.

Tom Kloza, chief oil analyst for OPIS, said that pump prices are still falling along the West Coast, in the Rockies and in New England. The national average increased, he said, mainly because of price hikes in the Midwest and the Southeast, where Mississippi River flooding will make it harder for refineries to transport gasoline to wholesale markets.

“They might not be able to receive shipments from barges or oil tankers for some time,” Kloza said. “There’s some worry about that.”

Alon Refining Krotz Springs said late Wednesday that its operation in Krotz Springs, Louisiana, “may be disrupted” if the Army Corps of Engineers opens the Morganza spillway to take the pressure off levees protecting Baton Rouge. Other refineries said they’re watching water levels closely and have lined their facilities with sandbags as a precaution.

Kloza and other analysts think pump prices will fall across the country, to about US$3.50 a gallon (less than a dollar a liter) by the end of the month, once flooding and other problems that have slowed some refinery production are cleared.

The Labor Department yesterday said rising energy prices made raw materials and factory goods more expensive in April. And the Commerce Department reported that consumer spending increased last month, with most of the increase going to higher food and gas prices.

Meanwhile, executives of top oil companies appeared before the Senate Finance Committee to explain why they should continue to receive big tax breaks while their companies make billions in profits. The hearing featured the CEOs of Shell Oil Co., ExxonMobil, ConocoPhillips, BP America and Chevron Corp.

The International Energy Agency cut its estimate for global demand this year by 190,000 barrels per day, noting that higher gasoline prices in the US appeared to be forcing Americans to cut back on driving. It still expects the world to consume more oil in 2011 than in any year on record.

The Energy Information Administration reported yesterday that US natural gas supplies rose by 70 billion cubic feet last week. Storage levels are about 2 percent below the five-year average. Natural gas for June delivery added 1.5 cents to settle at US$4.256 per 1,000 cubic feet (28.32 cubic meters).

In other Nymex trading for June contracts, gasoline fell 5.89 cents to settle at US$3.0639 per gallon (3.79 liters) and heating oil gained 1.54 cents to settle at US$2.9137 per gallon (3.79 liters).

In London, Brent crude rose 19 cents to settle at US$112.98 per barrel on the ICE Futures exchange.

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HONG Kong’s government yesterday sold a site close to the Peak luxury residential area and two other plots above analyst estimates, signaling developers are confident efforts to cool prices won’t damp demand for high-end homes.

Sun Hung Kai Properties Ltd bought the site on Stubbs Road on Hong Kong Island for HK$4.49 billion (US$578 million), equivalent to HK$24,829 per buildable square foot, based on calculations by Centaline Property Agency Ltd. It may be sold for HK$4.4 billion, the median estimate of five surveyors and analysts polled by Bloomberg News.

Government curbs are unlikely to dent appetite for luxury apartments in locations where fewer plots are available for sale, said Eva Lee, a property analyst at Macquarie Securities Ltd. The government in November increased property transaction taxes and pledged to boost land supply amid public protests that prices are becoming unaffordable and as the central bank warned about the risk of a “credit-fueled property bubble.”

“High-end properties always have better holding value in the long run,” Lee said in an interview in Hong Kong yesterday before the auction.

Estimates for the Stubbs Road site, with a buildable area of 180,835 square feet, ranged from HK$3.6 billion to HK$4.5 billion, with the median translating to HK$24,000 a square foot. Victor Lui, executive director at Sun Hung Kai, Hong Kong’s biggest developer, said his company made the winning bid.

China Overseas Land & Investment Ltd bid HK$579 million for a site in the Kowloon Tong area. Cheung Kong (Holdings) Ltd paid HK$662 million, 60 percent above the HK$410 million median, for a piece of land in Yuen Long.

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