Stocks Extend Rally, Buoyed by Oil, Financial Shares
25 Maio 2016 - 6:39PM
Dow Jones News
By Saumya Vaishampayan and Riva Gold
The S&P 500's financial sector rallied to its highest level
of the year Wednesday, propelling the broader market for the second
straight session.
The Dow industrials and S&P 500 have risen more than 2%
since last Thursday, as oil prices approach $50 a barrel and
investors appear more comfortable with the prospect of higher
interest rates as early as next month.
The gains, which include the S&P 500's biggest advance in
more than two months on Tuesday, have pushed the index near its
highest close for the year.
"People are realizing that rates going up is not a negative for
the longer-term economy -- it's a positive vote of confidence that
things are going better than people hoped," said JJ Kinahan, chief
strategist at TD Ameritrade.
On Wednesday, the Dow Jones Industrial Average gained 145.46
points, or 0.8%, to 17851.51. The S&P 500 rose 14.48, or 0.7%,
to 2090.54 and the Nasdaq Composite advanced 33.84, or 0.7%, to
4894.89.
Energy shares notched some of the biggest gains in the S&P
500 as U.S. crude oil rose 1.9% to $49.56 a barrel. Shares in
Transocean, which provides offshore contract drilling services for
energy companies, rose 89 cents, or 9.7%, to $10.11. Chesapeake
Energy shares rose 30 cents, or 7.4%, to 4.35.
Shares of banks and other financial firms continued to advance,
reflecting investors' heightened expectations for interest-rate
increases this year. The S&P 500's financial sector rose 1% to
reach a 2016 high, though the group remains down 0.5% for the year.
The KBW Nasdaq Bank Index of large U.S. commercial lenders rose
1.9%.
Fed-fund futures, which are used by investors and traders to
place bets on central-bank policy, showed that the odds of a rate
increase at the Fed's June meeting were 28% on Wednesday afternoon,
according to CME Group. Those odds stood at 4% earlier this
month.
"Any time you have the odds of a hike increasing so dramatically
in such a short amount of time, there's going to be an intense
move" in financial stocks, said R.J. Grant, associate director of
equity trading at KBW Inc.
Despite recent gains, many investors are skeptical that the
stock market will produce big returns this year, in part as the
global economy remains sluggish.
Greg Woodard, portfolio strategist at Manning & Napier,
which manages $38.1 billion, said he looks for "companies that have
some kind of growth driver that is not as linked to what the
Federal Reserve is doing, what oil prices are doing, or what global
growth is doing." He said that includes Google parent Alphabet and
Facebook, both of which Mr. Woodard's firm has invested in.
Alphabet Class A shares rose 5.07, or 0.7%, to 738.10, while
shares in Facebook added 19 cents, or 0.2%, to 117.89.
The Stoxx Europe 600 climbed 1.3% to its highest close since
April 28. Eurozone finance ministers and the International Monetary
Fund reached a deal early Wednesday that clears the way for fresh
loans for Greece and prevents the country from defaulting on big
debt redemptions in July.
Analysts said the deal reduced the risk of a summer crisis, but
fell short of a long-term solution for the country's debt
problems.
"We're going into a period of uncertainty," said Patrick George,
global head of equities at HSBC. "Big investors are sitting on the
sidelines, waiting," he said, adding that international investors
have been shy about investing in Europe because of uncertainty over
what shape it will have after June 23, when the U.K. holds a
referendum on its membership in the European Union.
The British pound gained 0.6% against the dollar to $1.4705.
In Asia, Japan's Nikkei Stock Average added 1.6% and Hong Kong's
Hang Seng Index gained 2.7%.
Shares in Shanghai ended slightly lower, however, after China
guided the yuan to its weakest level against the dollar in more
than five years.
Gold for May delivery slipped 0.4% to $1,223.50 an ounce. The
yield on the 10-year Treasury note rose to 1.870% from 1.859% on
Tuesday.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and
Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
May 25, 2016 17:24 ET (21:24 GMT)
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