S&P 500 at Seven-Week High as Biotech, Commodity Shares Rally

  • Energy companies extend gains to 7th day, longest since 2013
  • Biotech shares rebound to pace gains in health-care group

The Standard & Poor’s 500 Index reached its highest level since the end of the August selloff, rising as biotechnology companies rebounded and energy shares extended their longest rally since December 2013.

The benchmark index again tested points where an advance petered out at the end of August and a September rally wilted. Commodity stocks rose for a seventh session, weathering through a late-morning fade, with the appeal of the beaten-down energy and raw-materials groups enhanced by the dollar’s recent weakness.

The S&P 500 advanced 0.8 percent to 1,995.83 at 4 p.m. in New York, rebounding from a midday drop of as much as 0.2 percent to close at its highest since Aug. 20. The index closed within a point of its average price during the past 50 days. The Dow Jones Industrial Average increased 122.10 points, or 0.7 percent, to 16,912.29. The Nasdaq Composite Index climbed 0.9 percent, bringing its 2015 gain to 1.2 percent.

“The commodity rally extending itself is a significant story,” said Andrew Burkly, head of institutional portfolio strategy at Oppenheimer & Co. in New York. “The movement has come from people looking to see if oil prices can hold above $50, or if there is an oversold bounce. Overall, it’s the continuing story, that commodity-centric and energy companies have been doing better.”

It was a whipsaw session for investors as an early 1 percent climb led by energy stocks faltered, with equities erasing gains after a government report showed that U.S. crude inventories and production climbed. The S&P 500 retreated twice after reaching its 50-day moving average before closing just below that level amid a surge in the final minutes.

The Chicago Board Options Volatility Index fell 5.2 percent Wednesday to 18.40, its lowest since August 19. The measure of market turbulence known as the VIX dropped for a seventh day, the longest stretch since February 2014, losing 33 percent over the period. About 8.4 billion shares changed hands on U.S. exchanges, 13 percent above the three-month average.

Stocks have swung between gains and losses since August’s tumble, amid concern about a slowing global economy triggered by weakness in China, and confusion over the Federal Reserve’s policy intentions. The S&P 500 has rebounded 4 percent since ending its worst quarter in four years, and is up 6.9 percent from an August low reached during the index’s first correction since 2011.

Expectations for the Fed to raise borrowing costs this year have diminished since the weaker-than-expected September jobs report last Friday. Traders are pricing in a 39 percent chance of an increase in December and almost 62 percent probability of a move higher in March. The Bloomberg Dollar Index was little changed, after a four-day slide amid the lower odds of a Fed rate increase this year.

Biotechs Rebound

Among the S&P 500’s 10 main industries, health-care companies were the best performers as biotechnology shares rebounded from a two-day drop. Celgene Corp. and Amgen Inc. were up more than 4.2 percent, and the Nasdaq Biotechnology Index climbed 2 percent after sliding 3.8 percent yesterday.

Industrial companies rose for the third time in four sessions amid speculation that a weaker U.S. currency will lift profits for multinational companies, which benefit when their overseas earnings are converted back to dollars. Boeing Co. and General Electric Co. climbed 1.8 percent. United Rentals Inc. added 3.3 percent on its way to the strongest three-day rally in three years.

Energy and raw-materials shares regrouped after briefly erasing an early advance. The two industries also benefit from the weaker dollar, which makes commodities denominated in the U.S. currency more attractive. Transocean Ltd. and Murphy Oil Corp. rose more than 2.8 percent, paring earlier gains of at least 4 percent after the crude inventories data undercut the morning rally.

Freeport-McMoRan Inc. jumped 10 percent after the miner added two of Carl Icahn’s allies to its board. Newmont Mining Corp. and fertilizer maker Mosaic Co. gained at least 3.2 percent to rise for a fourth day, their longest rallies since May.

Earnings Season

Adobe Systems Inc. fell 5.3 percent, the most in six weeks, after forecasting fiscal 2016 sales and profit that fell short of analysts’ estimates. The software maker cited currency fluctuations and a change in how it charges customers.

Corporate earnings will grab an increased share of investors’ attention this week, with Alcoa Inc. unofficially kicking off the reporting season after markets close tomorrow. Companies reporting next week include Johnson & Johnson, Intel Corp. and JPMorgan Chase & Co.

Analysts project profits for S&P 500 members dropped 6.9 percent in the third quarter. Still, a Fed measure of corporate income has posted its biggest quarterly increase since 2012, suggesting the overall picture for profits may be skewed by downgrades at energy producers combating weak oil prices.

Among the season’s early reporters, Yum Brands Inc. tumbled 19 percent, the most in 13 years after the owner of the KFC, Pizza Hut and Taco Bell chains posted profits that missed analysts’ estimates. Results were hurt by a lingering slump in China.

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