Dow, S&P hit record highs; oil prices surge
Investors to keep close watch on Fed meeting
The S&P 500 and the Dow hit fresh record highs yesterday, fueled by energy shares, while the Nasdaq was lower, a day ahead of the US Fed’s two-day meeting.
Oil prices rose as much as 6.5 percent to an 18-month high after OPEC and some of its rivals reached their first deal since 2001 to jointly reduce output to try to tackle global oversupply and boost prices. The S&P energy index was the top gainer with a 2.4 percent rise. Oil majors Exxon and Chevron were up about 2.3 percent and provided the biggest boost to the Dow.
President-elect Donald Trump’s expected agenda of economic stimulus and reduced taxes and regulations has fueled a market rally, with the benchmark S&P 500 rising 5.6 percent since Nov 8 to Friday’s close. The Dow has closed at record highs 14 times since the election. “This market has gone up without taking a breather and will enter a cautious trading day as it awaits the Fed,” said Peter Cardillo, chief market economist at First Standard Financial in New York.
Investors are keeping a close watch on the US Federal Reserve’s last meeting for the year, beginning today, with a statement from Fed Chair Janet Yellen on Wednesday. The central bank is widely expected to raise benchmark interest rates, with market participants looking for clues about the pace of future hikes.
At 9:41 a.m. ET (1441 GMT) the Dow Jones industrial average was up 29.82 points, or 0.15 percent, at 19,786.67, the S&P 500 was down 0.68 points, or 0.030095 percent, at 2,258.85 and the Nasdaq Composite was down 23.66 points, or 0.43 percent, at 5,420.84.
Seven of the 11 major S&P sectors were lower, with the industrials index’s 0.64 percent fall leading the decliners. Viacom fell 6.4 percent to $36.14 after Sumner Redstone’s privately held National Amusements withdrew its merger proposal for CBS and Viacom, according to a source familiar with the situation. CBS was down 3.5 percent.
Lockheed Martin was down 4.2 percent at $248.75 after Donald Trump tweeted that the company’s F-35 program and costs were “out of control”. Other defense stocks, such as General Dynamics, Raytheon, and Northrop Grumman , were down between 3.4-6.1 percent. Ophthotech slumped 84.3 percent to $6.06 after Novartis said a combination of its eye drug along with the company’s did not produce better outcomes.
Declining issues outnumbered advancers on the NYSE by 1,550 to 1,133. On the Nasdaq, 1,495 issues fell and 916 advanced. The S&P 500 index showed 46 new 52-week highs and no new lows, while the Nasdaq recorded 87 new highs and seven new lows.
World oil prices surged yesterday after non-OPEC producers struck a deal to cut output, while Europe’s main stock markets were subdued before a key Fed meeting due this week. Indices in London, Frankfurt and Paris pulled back after soaring last week when the European Central Bank decided to extended its massive quantitative easing (QE) stimulus to December 2017.
At the same time, markets are on tenterhooks before a widely-expected interest rate hike from the US Federal Reserve tomorrow. “Markets are taking a breather after a strong run... and Fed risk this week,” City Index research director Kathleen Brooks told AFP. “Oil is in focus, so too is central bank risk, but overall we think it is low (trading) volumes as markets wait for the Federal Reserve before piling back in-or not, depending on the outcome.”
Oil prices surged over two dollars per barrel after 11 non-OPEC countries agreed to huge cuts in crude production, while OPEC kingpin Saudi Arabia also signalled a bigger reduction in output than previously agreed. The nonOPEC oil producing nations, led by Russia, said they would pump more than half a million fewer barrels a day from next month in an effort to address a supply glut that has scythed prices over the past two years.
That gave a shot in the arm to the energy sector because rising oil prices translate into higher revenues and profits. “It is a little surprising that investor sentiment is not more upbeat... given the latest leg higher in the oil price,” noted XTB analyst David Cheetham. “The main scheduled event that will be driving markets this week is the Fed meeting.” There seems little room for doubt that the US central bank will raise the benchmark interest rate in the coming week for only the second time in a decade.
Elsewhere, there is lingering uncertainty over the future of Italy’s troubled Monte dei Paschi di Siena (BMPS) bank. “Equities (generally) have made a poor start to the week despite a nonOPEC oil production cut pledge that bolsters OPEC’s own key promise, designed to maintain an oil price recovery,” said Mike van Dulken, head of research at trading firm Accendo Markets. “A lack of Monte dei Paschi rescue over the weekend has dampened sentiment somewhat, leaving the bank and troubled peers as an outstanding risk issue.” Rome’s main stocks index however pushed higher after Paolo Gentiloni was Sunday named Italy’s new prime minister following Matteo Renzi’s recent resignation. BMPS meanwhile said it would seek a private sector-led rescue, as it attempts to avoid the need for a government bailout. The plight of the world’s oldest bank has raised broader concerns over the eurozone’s third-largest economy. — Agencies