Stocks Close Higher as Oil Prices Slump
September 17 2019 - 04:38PM
Dow Jones News
By Anna Isaac and Karen Langley
The Dow Jones Industrial Average rallied in the final hour
Tuesday to recover early losses as oil prices slumped, reversing
some of their historic jump the day earlier.
The blue-chip index rose 33 points, or 0.1%, a day after
breaking an eight-session winning streak. The S&P 500 edged
higher about 0.3% as a decline in energy stocks nearly offset a
rally in safety sectors like real estate and utilities. The
technology-heavy Nasdaq Composite added 0.4%.
Earlier, Brent crude, the global oil benchmark, dropped 4.8% to
$65.69 a barrel after Reuters reported that Saudi output could
return more quickly than initially expected. Prices on Monday had
notched their biggest percentage gain on record after a weekend
attack on Saudi oil facilities left investors struggling to
calculate the likely impact on global supplies.
"What we are going to watch going forward is to see how these
higher oil prices affect the consumer, especially here in the
United States, as the U.S. consumer is driving the growth in the
economy right now," said Carter Henderson, portfolio specialist at
Fort Pitt Capital Group.
In addition to monitoring information about oil supply,
investors are looking ahead to the Federal Reserve's policy meeting
this week. Markets are expecting another quarter percentage point
interest rate cut Wednesday, but there will also be scrutiny of how
recent developments with Saudi Arabia and trade talks with China
might influence future policy.
The U.S. 10-year Treasury yield slipped to 1.798%,from 1.843%
Monday. Bond yields fall as prices rise.
Investors were also monitoring signs of turmoil in the repo
market. The Federal Reserve Bank of New York stepped in Tuesday for
the first time in more than a decade to relieve pressures that were
pushing short-term interest rates higher than the central bank
wanted. The Fed moved to put $53 billion of funds back into the
banking system through transactions known as repurchase
agreements.
Wednesday's policy decision is unrelated to the recent
funding-market strains.
"The expansion's been a story of slow and steady growth," said
Craig Birk, chief investment officer at Personal Capital. "There's
nothing to us that suggests that has to end anytime soon. The
consumer's still doing fine, unemployment's still very low,
manufacturing is a bit soft but not terrible. There's no reason the
slow and steady expansion can't continue, especially, it appears,
with continued support from the Fed."
New data Tuesday showed U.S. industrial production rebounded
sharply in August, a sign that is likely to ease worries about a
manufacturing-driven economic downturn.
In China, the Shanghai Composite dropped 1.7% and Hong Kong's
Hang Seng fell 1.2% as the People's Bank of China remained
restrained in its response to a recent spate of weak economic data.
The central bank on Tuesday disappointed economists who had hoped
it would move to effectively lower interest rates, though it took
steps to inject 200 billion yuan ($28.3 billion) into the banking
system.
"Because there was an injection of cash people were looking at
the PBOC closely. There was some surprise that there wasn't a cut
now. In recent history, they tend to keep pace with the Fed, but
they could still do that in the coming days," said Freya Beamish,
chief Asia economist at Pantheon Macroeconomics.
China's central bank officials will be more focused on trade
talks with the U.S. in October than on a cut in rates, Ms. Beamish
said.
Despite the gloom, Japan's Nikkei edged up 0.1% as President
Trump moved ahead with a trade pact with the country on areas such
as digital technology and agriculture. The step should see some
tariffs on Japanese imports to the U.S. lowered.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
September 17, 2019 16:23 ET (20:23 GMT)
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