By Ellie Ismailidou and Victor Reklaitis, MarketWatch
Oil jumps to 7-month high, helping energy shares
U.S. stocks rallied sharply Wednesday for the second straight
session after logging their best daily gains in nearly three months
on Tuesday.
A jump in oil prices near $50 a barrel following a Tuesday
report showing a decline in crude inventories
(http://www.marketwatch.com/story/crude-oil-rockets-to-near-50-a-barrel-as-data-hints-at-us-supply-drop-2016-05-25),
lifted energy and materials stocks. Oil futures held on to their
gains Wednesday, trading near a seven-month high after the U.S.
Energy Information Administration reported
(http://www.marketwatch.com/story/oil-holds-gains-after-eia-reports-42-million-barrel-fall-in-us-crude-supplies-2016-05-25)
that U.S. crude supplies declined by 4.2 million barrels in the
week ended May 20.
Meanwhile, growing expectations that the Federal Reserve might
raise interest rates as early as next month buoyed financial
companies' shares, as higher interest rates tend to boost banks'
balance sheets.
The S&P 500 was up 16 points, or 0.8%, to 2,092, led by
strong gains in financial stocks, up 1.2%, followed by a 1.1% rise
in energy stocks. The utilities sector was the only sector in
negative territory, down 0.4%.
The Dow Jones Industrial Average added 174 points, or 1%, to
17,878, led by a 2.6% jump in Goldman Sachs Group Inc.(GS),
followed by 2.2% rise in J.P. Morgan Chase & Co.(JPM) shares. A
0.5% drop in shares of Nike Inc. (NKE) weighed on the blue-chip
gauge.
Meanwhile, the Nasdaq Composite was up 36 points, or 0.7%, at
4,897.
" A big part of this rally is central-bank induced," said Quincy
Krosby, market strategist at Prudential Financial. The fact that
financials are leading the advance implies, according to Krosby,
that investors are betting that a potential rate hike will push the
10-year benchmark Treasury yield higher, boosting bank
profitability.
But overall, it is typically thought that "the market always
prefers a rate cut to a rate hike," Krosby said, so in order for
this rally to continue in a sustainable way, there needs to be
"broad market participation."
Some analysts pointed to nascent signs of such broad
participation. For instance, the recent rally in the technology
sector has been "much more broad based than what we saw during most
of the last two years," said Tim Anderson, managing director at MND
Partners, in emailed comments.
A rally in financial and tech stocks underpinned Tuesday's sharp
advance. The main difference from past rallies, according to
Anderson, is that dozens of technology stocks have been part of the
Nasdaq rally since last Thursday, including many sub groups that
have been languishing for many quarters.
Other strategists pointed to a shift in broader investor
sentiment.
"Traders continue to view the [Federal Reserve] moving toward an
interest-rate increase as a positive sign that the U.S. economy is
strong and overseas economic risks are fading, setting up a
positive environment for corporate earnings growth," said Colin
Cieszynski, chief market strategist at CMC Markets, in emailed
comments.
The surge in risk appetite, according to Cieszynski, weighed on
gold futures as capital continued to leave defensive havens, like
gold and U.S. Treasurys for more aggressive positions.
Still, some analysts appeared worried at the market's strong
gains ahead of a potential interest-rate hike that could come as
soon as June.
"I really am trying to get my head around the newfound
euphoria," said David Buik, market commentator for Panmure Gordon
& Co. "Yes, I get the learning to live with a 25-basis-point
U.S. Fed rate hike in June or July ... but I wonder!"
Other markets: European stocks were advancing, while Asian
markets mostly closed higher
(http://www.marketwatch.com/story/asian-stocks-boosted-by-strong-oil-prices-upbeat-us-data-2016-05-25).
Gold futures were losing ground, and the ICE U.S. Dollar Index
inched lower.
Read:Citi expects Brent crude to reach $50 a barrel in the third
quarter
(http://www.marketwatch.com/story/new-age-for-oil-prompts-citi-to-raise-2017-forecast-to-65-2016-05-24)
Economic news: Investors shrugged off a report that showed the
nation's trade deficit widened in April
(http://www.marketwatch.com/story/us-goods-deficit-shows-higher-trade-gap-in-april-2016-05-25),
as imports increased faster than exports.
Minneapolis Fed President Neel Kashkari is expected to talk at
11:40 a.m. about the energy sector and monetary policy. At 1:30
p.m. Eastern, Dallas Fed President Steven Kaplan has been slated to
take part in a moderated question-and-answer session. None of the
speakers is currently a voting member of the Fed.
Individual movers: Shares in Hewlett Packard Enterprise Co.(HPE)
surged 10.7%, on track for their best daily gain in 11 weeks. The
company late Tuesday said it will spin off its enterprise services
business and merge it
(http://www.marketwatch.com/story/hp-enterprise-to-spin-off-merge-services-business-2016-05-24-164855124)
with Computer Sciences Corp.(CSC)
Read:Hewlett Packard Enterprise -- another day, another spinoff?
(http://www.marketwatch.com/story/hewlett-packard-enterprise-another-day-another-spinoff-2016-05-24)
Microsoft Corp. shares (MSFT) gained 1% after the tech giant
early Wednesday said it will lay off 1,850 workers
(http://www.marketwatch.com/story/microsoft-to-layoff-1850-from-smartphone-business-2016-05-25)
from its ailing smartphone business.
Alibaba Group Holding Ltd.'s (BABA) stock dropped 3.9% after the
China-based ecommerce giant disclosed in a filing that it was being
investigated by the U.S. Securities and Exchange Commission.
(http://www.marketwatch.com/story/alibabas-stock-slumps-after-disclosure-of-sec-probe-into-singles-day-data-consolidation-practices-2016-05-25)
Jewelry seller Tiffany & Co.(TIF) fell 1.6% after its
quarterly revenue and outlook disappointed
(http://www.marketwatch.com/story/tiffanys-stock-rocked-by-sales-miss-downbeat-outlook-2016-05-25),
and clothing retailer Express Inc.(EXPR) tumbled 14.4% following
its quarterly report
(http://www.marketwatch.com/story/express-cuts-outlook-after-revenue-flattens-2016-05-25).
(END) Dow Jones Newswires
May 25, 2016 11:15 ET (15:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Apr 2023 to Apr 2024
