Stocks gain as oil price falls sharply

NEW YORK — Stocks finished moderately higher today following a sharp drop in oil and despite a warning from Citigroup that a "substantial" amount of write-downs on bad debt are still to come.

The Dow Jones industrial average rose 34.03 to 12,063.09. The Dow fell below the 12,000 mark in Wednesday's trading for the first time since mid-March.

Microsoft, one of the 30 Dow stocks, gained 47 cents to close at $28.93 a share. Boeing, also a Dow stock, soared $2.30 to $76.95.

Broader stock measures also advanced. The Standard & Poor's 500 index rose 5.02 to 1,342.83, and the Nasdaq composite index jumped 32.35 to 2,462.06.

Light, sweet crude for July delivery fell $4.75 to settle at $131.93 a barrel on the New York Mercantile Exchange.

China disclosed that it will raise prices for gasoline and diesel fuel 16 percent and 18 percent, respectively, beginning Friday.

Growing Chinese demand for oil has underpinned the multiyear rally in oil prices, but higher prices could crimp that demand. Concerns about spiking Chinese demand for diesel due to cleanup operations in the aftermath of last month's earthquake contributed to oil's recent run-up.

"This could change the psychology of the market completely," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

Lower demand in China "would be a major factor in driving prices down," said Phil Flynn, an analyst at Alaron Trading in Chicago.

Also pressuring prices today was Iraq's announcement.

The service agreements would be the first major Iraqi contracts with big Western companies since the 2003 U.S.-led invasion. In March, Iraq's Cabinet said the ministry could sign deals worth around $500 million each. Baghdad hopes to boost output by 600,000 barrels a day over its current 2.5 million barrels a day.