Stocks Extend Rally, Buoyed by Oil
May 25 2016 - 04:37PM
Dow Jones News
By Riva Gold and Saumya Vaishampayan
U.S. stocks rose for the second consecutive session Wednesday,
boosted by energy and financial shares.
The Dow industrials and S&P 500 have risen more than 2%
since last Thursday as oil prices approach $50 a barrel and
investors appear more comfortable with the prospect of higher
interest rates as early as this summer.
The gains, which include the S&P 500's biggest advance in
more than two months on Tuesday, have pushed the index near its
highest close for the year.
"People are realizing that rates going up is not a negative for
the longer-term economy -- it's a positive vote of confidence that
things are going better than people hoped," said J.J. Kinahan,
chief strategist at TD Ameritrade.
The Dow Jones Industrial Average gained 145 points, or 0.8%, to
17852. The S&P 500 and the Nasdaq Composite rose 0.7%.
Energy stocks notched some of the biggest gains in the S&P
500 as U.S. crude oil rose 1.9% to $49.56 a barrel, the highest
settlement since Oct. 9. Shares in Transocean, which provides
offshore contract drilling services for energy companies, rose
9.7%. Chesapeake Energy shares rose 7.4%.
Shares of banks and other financial firms continued to rally,
reflecting investors' heightened expectations for interest-rate
increases this year. The S&P 500's financial sector rose 1% to
reach its highest level this year, and the KBW Nasdaq Bank index of
large U.S. commercial lenders rose 1.9%.
Fed-fund futures, which are used by investors and traders to
place bets on central-bank policy, showed that the odds of a rate
increase at the Fed's June meeting were 36% on Wednesday, according
to CME Group. Those odds stood at 4% earlier this month.
"Any time you have the odds of a hike increasing so dramatically
in such a short amount of time, there's going to be an intense
move" in financial stocks, said R.J. Grant, associate director of
equity trading at KBW Inc.
The Stoxx Europe 600 climbed 1.3% to its highest close since
April 28. Eurozone finance ministers and the International Monetary
Fund reached a deal early Wednesday that clears the way for fresh
loans for Greece and prevents the country from defaulting on big
debt redemptions in July.
Analysts said the deal reduced the risk of a summer crisis, but
fell short of a long-term solution for the country's debt
problems.
"We're going into a period of uncertainty," said Patrick George,
global head of equities at HSBC. "Big investors are sitting on the
sidelines, waiting," he said, adding that international investors
have been shy of investing in Europe because of uncertainty over
what shape it will have after June 23, when the U.K. holds a
referendum on membership in the European Union.
Despite the recent gains, few investors are betting on big
stock-market returns this year, in part as the global economy
remains sluggish.
We're looking for "companies that have some kind of growth
driver that is not as linked to what the Federal Reserve is doing,
what oil prices are doing, or what global growth is doing," said
Greg Woodard, portfolio strategist at Manning & Napier, which
manages $38.1 billion. He said that includes companies like Google
parent Alphabet Inc. and Facebook Inc., both of which Mr. Woodard's
firm has invested in.
In Asia, Japan's Nikkei Stock Average added 1.6% and Hong Kong's
Hang Seng Index gained 2.7%, bolstered by the rise in oil prices
and strong finish on Wall Street.
Shares in Shanghai ended slightly lower, however, after China
guided the yuan to its weakest level against the dollar in more
than five years.
The dollar added 0.1% against the yen to Yen110.11, while the
British pound gained 0.7% against the dollar to $1.4719.
Gold for May delivery slipped 0.4% to $1,223.50 an ounce. The
yield on the 10-year Treasury note rose to 1.866% from 1.859% on
Tuesday.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and
Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
May 25, 2016 16:22 ET (20:22 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.