Stocks Move To The Upside Amid Jump In Oil Prices - U.S. Commentary

(RTTNews) - Stocks fluctuated over the course of the trading session on Wednesday but managed to end the day mostly higher. With the upward move on the day, the major averages added to the notable gains posted in the previous session.

The major averages ended the day just off their highs of the session. The Dow climbed 110.94 points or 0.6 percent to 18,339.24, the Nasdaq edged up 12.84 points or 0.2 percent to 5,318.55 and the S&P 500 rose 11.44 points or 0.5 percent to 2,171.37.

The strength that emerged on Wall Street was primarily due to a sharp increase by the price of crude oil, which spiked higher in reaction to a report from Reuters indicating that OPEC members have reached an agreement to cut oil output.

Citing two OPEC sources, Reuters said the group has agreed to reduce oil output to 32.5 million barrels per day from current production levels of about 33.24 million barrels per day.

How much each country will produce will be determined at the next formal meeting of OPEC in November, Reuters said.

The price of crude oil jumped in response to the report, with crude for November delivery surging up $2.38 to $47.05 a barrel.

Earlier in the day, traders seemed somewhat reluctant to make significant moves as they digested remarks by Federal Reserve Chair Janet Yellen.

In testimony before the House Financial Services Committee, Yellen told lawmakers there is no "fixed timetable" for raising interest rates but noted that a majority of the members of the Federal Open Market Committee think a rate hike is likely this year.

Yellen also cautioned that continued job creation at the current pace could cause the economy to overheat, forcing the Fed to raise rates faster than currently anticipated.

On the U.S. economic front, the Commerce Department released a report this morning showing that durable goods orders came in flat in the month of August.

The Commerce Department said durable goods orders were virtually unchanged in August after jumping by a revised 3.6 percent in July. Economists had expected orders to pull back by about 1.4 percent.

Excluding orders for transportation equipment, durable goods orders fell by 0.4 percent in August after surging up by 1.1 percent in July. The drop matched economist estimates.

Sector News

Energy stocks moved sharply higher in reaction to the jump by the price of crude oil, contributing to the upward move shown by the broader markets.

Reflecting the strength in the energy sector, the NYSE Arca Oil & Gas Index shot up by 4 percent, while the NYSE Arca Natural Gas Index and the Philadelphia Oil Service Index soared by 4.6 percent and 5.7 percent, respectively.

Substantial strength was also visible among steel stocks, as reflected by the 4.1 percent gain posted by the NYSE Arca Steel Index. With the gain, the index reached its best closing level in over a month.

Gold stocks also showed a strong move to the upside, resulting in a 2.5 percent advance by the NYSE Arca Gold Bugs Index. The strength in the sector came despite a decrease by the price of gold.

On the other hand, biotechnology stocks saw notable weakness on the day, dragging the NYSE Arca Biotechnology Index down by 1.1 percent. Juno Therapeutics (JUNO) and Novavax (NVAX) turned in two of the sector's worst performances.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.3 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.

Meanwhile, the major European markets all moved back to the upside on the day. While the U.K.'s FTSE 100 Index climbed by 0.6 percent, the German DAX Index and the French CAC 40 Index advanced by 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries came under pressure late in the session and closed modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.1 basis points to 1.567 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to some key U.S. economic data, including reports on second quarter GDP, weekly jobless claims, and pending home sales. Remarks by several Fed officials may also attract attention.