US stocks rise as crude rallies
S&P 500 adds 0.8%, Dow Jones Industrial Average climbs 0.6%
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London/New York: US stocks rose, with the Standard & Poor’s 500 Index extending gains as crude pushed past $41 a barrel to overshadow a tepid start to the first-quarter earnings season.
Energy producers surged as Russia and Saudi Arabia reached a consensus on an oil freeze, according to Interfax. Chesapeake Energy Corp. surged 26% after pledging assets to maintain access to financing. Alcoa Inc. slid after the largest US aluminum producer cut its forecast for global demand. Juniper Networks Inc. plunged after sales missed forecasts, dragging the semiconductor industry lower.
The S&P 500 added 0.8% to 2,057.33 at 11:48 a.m. in New York. The benchmark reversed gains in late afternoon trading to close 0.3% lower Monday, following the steepest weekly decline in two months. The Dow Jones Industrial Average climbed 102.59 points, or 0.6%, to 17,659.
“Oil prices have really been the driver of sentiment, with a high positive correlation,” said David Spika, global investment strategist for GuideStone Capital Management. “There’s continued positive sentiment that is a function of a more dovish Fed as well as continued oil price strength and weakness in the dollar.”
The rally in crude is overshadowing the start of earnings season that is forecast to be the worst since the financial crisis, with analysts projecting first-quarter profits shrank 10% -- including a 20% decline for banks -- compared with earlier estimates for flat growth.
“We don’t have strong revenue growth -- that’s what we heard from Alcoa,” said Spika. “Until we have that, particularly with wage pressure, it’s hard to justify a move higher in the market. Investors are whistling past the graveyard and not focusing on the key issue. It’s a show me market, and we need earnings to push it forward from here.”
After a tumultuous start to the year that saw the S&P 500 tumble as much as 11%, US equities are now almost unchanged amid optimism that central-bank policies will remain supportive of growth. Traders are now pricing in zero chances of an interest-rate increase in April, and the first month with at least even odds for a boost has been pushed to February 2017.
Still, a rally that pushed the S&P 500 up as much as 13% from a 11 February low is fading as reasons for additional stock gains grow thin, with stock valuations well above the five-year average.
Among other stocks active on corporate news, Fastenal Co. lost 2.4% after also posting sales and earnings that missed the average analyst estimate. Bloomberg
--With assistance from Sofia Horta e Costa.
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