Dow, S&P hit record highs; oil prices surge

In­vestors to keep close watch on Fed meet­ing

Kuwait Times - - BUSINESS -

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

NEW YORK: An elec­tronic screen shows the Nas­daq Com­pos­ite at the Nas­daq Mar­ketSite yes­ter­day in New York. — AP

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