Stocks Inch Closer to Record High, Supported by Oil Prices
07 Juin 2016 - 11:43PM
Dow Jones News
By Riva Gold and Aaron Kuriloff
The S&P 500 crept closer to its record high Tuesday, lifted
by oil's return to $50 a barrel and renewed confidence that U.S.
interest rates will stay low.
The gains briefly boosted the Dow industrials above 18000 for
the first time in more than a month and the S&P 500 closed
within 0.9% of its record, spurred by energy shares that have
climbed with the price of oil in recent months.
Stocks pared gains late in the session. The Dow Jones Industrial
Average rose 17.95 points, or 0.1%, to 17938.28, its highest close
since April 27. The S&P 500 climbed 2.72 points, or 0.1%, to
2112.13, its highest close since July 22. The Nasdaq Composite
Index fell 6.96 points, or 0.1%, to 4961.75 and is still down so
far in 2016.
Crude oil extended gains as the dollar weakened and production
outages curbed supply. U.S. crude rose 1.3% to $50.36 a barrel,
settling above $50 for the first time since July. Prices have
nearly doubled since hitting 13-year lows earlier in 2016 as
companies have cut spending on new drilling and unplanned outages
in Nigeria and Canada helped shrink the global oil glut.
U.S. crude production fell by 250,000 barrels a day in May from
April, the largest one-month decline in years, the Energy
Information Administration said Tuesday in its short-term energy
outlook.
Energy shares in the S&P 500 added 2.1%. EOG Resources
climbed $4.15, or 5.1% to $85.42 and Concho Resources gained 5.75,
or 4.8%, to 126.26. Chevron and Exxon Mobil were among the biggest
gainers in the Dow industrials.
The energy sector's earnings have declined for six consecutive
quarters year-over-year, according to FactSet, so oil's price gains
could brighten the outlook for some of those companies. Energy
shares in the S&P 500 have rallied 11% in the past three
months.
"Oil has continued to strengthen, giving people comfort that at
some point we can see a recovery in S&P 500 earnings," said
Doug Foreman, chief investment officer at Kayne Anderson Rudnick
Investment Management.
"Areas like energy, industrial materials and a lot of
commodities -- which had been decimated -- are coming out of a
depression, and that change alone is very, very positive for the
overall marketplace," he said.
U.S. government bond yields fell as concerns about rising rates
faded. The yield on the benchmark 10-year Treasury note was 1.713%
compared with 1.723% Monday. Yields fall as bond prices rise.
Many investors drew reassurance from a speech by U.S. Federal
Reserve Chairwoman Janet Yellen on Monday, in which she said Fed
officials expect the economy to improve but won't raise interest
rates until new uncertainties about the economic outlook are
resolved.
"We think they're going to move very, very slowly," said Monica
Defend, head of global asset allocation research at Pioneer
Investments.
Friday's weaker-than-expected jobs report sharply reduced
expectations for a rate rise at the Fed's June and July
meetings.
The WSJ Dollar Index, which measures the dollar against a basket
of 16 currencies, fell 0.4%. The dollar tends to benefit from
higher interest rates.
"Every data point is really being dissected," said Chris Dyer,
director of global equity at Eaton Vance. "Consumer strength has
been a real engine of growth in the U.S. economy, and this [jobs
report] raises a little bit of a red flag," he said.
The Stoxx Europe 600 rose 1.1%, led by energy companies.
Japan's Nikkei Stock Average added 0.6%, while Hong Kong's Hang
Seng Index gained 1.4%.
--Nicole Friedman contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Aaron Kuriloff at
aaron.kuriloff@wsj.com
(END) Dow Jones Newswires
June 07, 2016 17:28 ET (21:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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