Wall Street climbed on Tuesday, buoyed by energy shares as sliding oil prices stabilised and by fairly healthy data on US economic growth, while the dollar fell for a third consecutive session.
Wall Street has been closely correlated with energy prices in recent weeks as crude has extended a 1-1/2-year slide this month and plumbed fresh multi-year lows.
US crude prices settled up 0.9 per cent to $36.14 a barrel, as traders squared positions ahead of a traditional year-end period of low liquidity. Brent fell 0.4 per cent to $36.20 a barrel, after trading higher earlier in the session.
Between the two crude prices, "there is some stability here," said Michael Holland, chairman of Holland & Co in New York.
At this time of year, "so few people are involved in the marketplace that any single thing can have an outsized reaction in the market," Holland said. "The fact that oil is up is a major piece of the puzzle here."
The Dow Jones industrial average rose 165.65 points or 0.96 per cent to 17,417.27, the S&P 500 gained 17.82 points or 0.88 per cent to 2,038.97 and the Nasdaq Composite added 32.19 points or 0.65 per cent to 5,001.11.
The S&P energy sector index rose 1.2 per cent, as did the materials and industrials groups.
Noting that those three sectors are among those "that have been blasted the most'' this year, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said the stock rally "could be simply an oversold bounce''.
The pan-European stock index edged down 0.04 per cent. Spain's IBEX rose 0.5 per cent, rebounding following a selloff in the previous session after an inconclusive Spanish election result.
MSCI's all-country world index rose 0.7 per cent.
Investors digested mixed data out of the United States.
US home resales posted their sharpest drop in five years in November, according to the National Association of Realtors, in a potential warning sign for the US economy.
A separate report from the Commerce Department showed the country's gross domestic product grew at a 2.0 per cent annual pace in the third-quarter, a fairly healthy clip, supported by strong consumer and business spending.
The US economic growth and inflation data reinforced the view that the Federal Reserve would proceed with a steady pace of interest rate increases next year, which sent shorter-dated Treasury yields modestly higher.
US 30-year Treasury yields rose on the recovery in US crude oil prices, which suggested marginally higher inflation, analysts said. Higher inflation tends to lead traders to sell long-dated Treasuries since inflation erodes interest payouts on those bonds.
Benchmark 10-year Treasury notes were down 11/32 in price to yield 2.238 per cent from a yield of 2.197 per cent late Monday. US 30-year Treasury bonds were down 26/32 in price to yield 2.966 per cent from a yield of 2.925 per cent late Monday.
The dollar index, which tracks the greenback against a basket of currencies, fell 0.2 per cent, as more traders booked profits on bullish bets following the Fed's interest rate increase last week. The euro rose 0.4 per cent against the dollar.
"As soon as Fed's rate hike was out of the way, we saw a lot of investors getting out of their long dollar positions," said Sireen Harajli at Mizuho Corporate Bank in New York.
Spot gold slipped 0.6 per cent after two sessions of gains.
Copper fell 1.5 per cent as traders were reluctant to push the metal above Monday's five-week peak given slowing economic growth in China.
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