U.S. Stocks Climb as Arms Deals Buoy Defense Contractors
May 22 2017 - 1:38PM
Dow Jones News
By Alexander Osipovich and Riva Gold
Gains in technology and industrial shares lifted U.S. stocks
Monday, with news of more than $100 billion in arms deals with
Saudi Arabia boosting defense contractors.
The Dow rose 89 points, or 0.4%, to 20894. The S&P 500 added
0.5% and the Nasdaq Composite gained 0.7%.
Technology stocks in the S&P 500 rallied 0.8% after posting
their worst session of the year last week. Shares in Cisco Systems
rose 1.9%.
Shares of aerospace and defense companies climbed, with Boeing
and Lockheed Martin both adding 1.5%. Blackstone Group also surged
6.8% after Saudi Arabia agreed to commit $20 billion to the
private-equity giant's new infrastructure fund.
Stocks had fallen last week amid concerns that uncertainty
around the Trump administration could derail plans for tax cuts,
regulation and infrastructure spending, but markets quickly pared
losses, ending the week just a touch lower.
"Defense is a big part of the move today," said Chris
Zaccarelli, chief investment officer of Cornerstone Financial
Partners.
Signs of improvement in corporate earnings have also lifted
shares in recent weeks. Of the 95% of S&P 500 companies that
have reported results so far for the first quarter, 75% have beat
earnings per share estimates, according to FactSet.
Shares of Ford Motor rose 1.6% following news Jim Hackett has
been named Ford's new chief executive.
"It's quite encouraging how we bounced back from that wobble
last week," said Ian Williams, strategist at brokerage Peel Hunt.
"It underlines very strong bottom-up corporate earnings performance
across all major developed markets...that's been a big factor
offsetting geopolitical concerns," he said.
U.S. crude oil rose 0.8% to $51.05 a barrel, touching its
highest level in a month ahead of Thursday's meeting of the
Organization of the Petroleum Exporting Countries, where many
expect an extension to ongoing production cuts. Saudi energy
minister Khalid al-Falih said Sunday that oil producers are
enthusiastic about extending crude output cuts by nine months.
"I think $40-60 [a barrel] is a reasonably good sweet spot
markets are comfortable with," said Phil Orlando, chief equity
strategist at Federated Investors. It is a level where frackers can
make money, but not so high that it is overly inflationary or
reduces consumption, he said.
Many investors will be watching for minutes from the Federal
Reserve's May policy meeting, due Wednesday, as well as a raft of
speeches from Fed officials this week for any hints at when it
might start to reduce its $4.5 trillion balance sheet and how that
could affect the course of interest rates. Investors currently see
a 78.5% chance of a rate rise in June, according to fed-fund
futures tracked by CME Group.
The WSJ Dollar Index edged down 0.1% following its worst week
since July 2016. The yield on the benchmark 10-year U.S. Treasury
note was steady at 2.246%, according to Tradeweb, from 2.243% on
Friday. Yields rise as prices fall.
The Stoxx Europe 600 edged down less than 0.1%.
Japan's Nikkei Stock Average climbed 0.5%, led by steel, energy
and machinery companies. Hong Kong's Hang Seng Index rose 0.9% to
its highest close since 2015, while South Korea's Kospi gained
0.7%, ending at a new record. Stocks in Shanghai shed 0.5%.
Write to Alexander Osipovich at alexander.osipovich@dowjones.com
and Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
May 22, 2017 13:23 ET (17:23 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.