NOI Natl Oilwell

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 advanced to within 1% of its record.

Stocks have risen from recent lows in mid-May, led by energy shares that have climbed with the price of oil. Some traders said the rally came in light trading, with little enthusiasm to suggest a sustained climb is pending.

"It's almost the absence of a negative, rather than any broad-brush positive," that's moving stocks higher, said Bill Nichols, head of U.S equities at Cantor Fitzgerald.

The Dow Jones Industrial Average gained 18 points, or 0.1%, to 17938. The S&P 500 climbed 0.1%, while the Nasdaq Composite Index slipped 0.1%.

Crude extended gains Tuesday as the dollar weakened and global outages curbed supply. U.S. crude rose 1.3% to $50.36 a barrel to settle at its highest level since July.

Energy shares in the S&P 500 added 2.1% as Newfield Exploration and Marathon Oil both climbed 4.7%. Chevron and Exxon Mobil were among the biggest gainers in the Dow industrials.

Energy shares in the S&P 500 have rallied more than 10% in the past three months, while the materials sector has gained over 9%. The energy sectors's earnings slump has included six consecutive quarters of year-over-year declines, so the near-doubling of U.S. crude oil prices since February could brighten the outlook for some of those companies.

"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 1.709%, according to Tradeweb, compared with 1.723% Monday. Yields fall as bond prices rise.

The 10-year German Bund touched a record low of 0.048%.

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. Market participants currently price just a 4% chance of a rate rise in June and a 25% chance of a rise by July, according to Fed-fund futures tracked by CME Group.

"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 WSJ Dollar Index, which measures the buck against a basket of 16 currencies, fell 0.4%.

Health care stocks were the leading decliners in the S&P 500, falling 0.7%. Shares of Valeant Pharmaceuticals International fell 15% after the company lowered its forecast for financial performance. The Nasdaq Biotechnology Index lost 2.5%.

The Stoxx Europe 600 rose 1.1%, led by energy companies, following an upbeat session in Asia.

Asian shares mostly closed higher, boosted by the recent rally in commodities and a strong finish on Wall Street. Japan's Nikkei Stock Average added 0.6%, while Hong Kong's Hang Seng Index gained 1.4%.

In currencies, the euro was little changed against the dollar at $1.1361, while the dollar lost 0.2% against the yen to Yen107.3360.

The British pound recovered 0.6% against the dollar to $1.4547 after new polls suggested support for the U.K. to remain in the European Union in a June 23 referendum.

--Akane Otani 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 16:23 ET (20:23 GMT)

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