Photographer: Jeff Kowalsky /Bloomberg

U.S. Stocks Rise as Commodity Shares Lead Rally Amid Oil Surge

  • Oil rallies to lift energy despite rising crude stockpiles
  • Services industry slowdown rekindled growth concerns

U.S. stocks rose for the first time in three days as commodity producers rallied with crude oil, overshadowing concerns that weakness in global growth is spreading.

Equities stormed higher in afternoon trading as crude futures jumped 8 percent as the dollar touched its lowest levels since 2009. Gains in energy and raw-materials sparked a broader advance that helped banks trim sharp declines. Exxon Mobil Corp. and Chevron Corp. advanced at least 4.1 percent, while Freeport-McMoRan Inc. gained more than 11 percent.

The Standard & Poor’s 500 Index climbed 0.5 percent to 1,912.53 at 4 p.m. in New York, after erasing an earlier drop of 1.6 percent. The Dow Jones Industrial Average rallied 183.12 points, or 1.1 percent, to 16,336.66, wiping out a drop of nearly 200 points. The Nasdaq Composite Index slipped 0.3 percent, after losing as much as 2.1 percent. About 10 billion shares traded hands on U.S. exchanges, 31 percent above the three-month average.

“Worries about a U.S. recession have pushed the dollar lower and perhaps moved the Fed off the table,” said John Canally, chief economic strategist at LPL Financial Corp. in Boston. “Because of that, coupled with OPEC news and oil moving higher, we’re having highs of the day. For stocks, it’s all about oil today.”

Equities lurched between gains and losses today as economic data rekindled worries about the strength of U.S. growth, while a tumble in the dollar helped send oil rocketing higher and boosted commodity producers.

A report today showed service industries expanded in January at the slowest pace in nearly two years, raising the risk that persistent weakness in manufacturing is starting to spread to the rest of the U.S. economy. The services slowdown comes as investors are on guard for signs that weakness in China is spilling over.

A separate reading today showed U.S. companies added a stronger-than-forecast 205,000 workers to payrolls in January. Focus will begin to shift to the government’s January employment report Friday, which is estimated to show the economy added 190,000 jobs, according to economists surveyed by Bloomberg.

The equity benchmark halted a two-day slide to start the month, with U.S. stocks coming off their worst January since 2009 as concerns about a slowdown in China and plummeting commodity prices unnerved investors. The S&P 500 is 10 percent below its all-time high set in May.

Earnings Season

Beyond oil and economic data, earnings reports also had some influence on stocks Wednesday. Oreo cookie maker Mondelez International Inc. fell 6.5 percent, the biggest drop in seven years, as its profit missed estimates. Gilead Sciences Inc. rose 4.5 percent as quarterly profit beat predictions and the company added $12 billion to its share buyback program. Yahoo! Inc. slumped 4.8 percent after its results, and signals that its core assets may be up for sale.

With the U.S. earnings season about midway through, some 80 percent of companies in the S&P 500 that have reported beat profit estimates, but less than half posted better-than-expected sales. Analysts estimate earnings at index members fell 5.6 percent in the fourth quarter, better than Jan. 15 predictions for a 7 percent slump.

The Chicago Board Options Exchange Volatility Index fell 1.5 percent Wednesday to 21.65. The measure of market turbulence known as the VIX earlier jumped as much as 26 percent when equities fell to session lows following data showing larger-than-forecast oil stockpiles.

‘Emotional’ Market

“This is an emotional, sentiment-driven market, and it’s likely to remain tied to oil,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “Nerves are pretty frayed after yesterday’s decimation with the deterioration in oil prices spilling over into equity markets.”

Among the S&P 500’s 10 main industries, energy and raw-material producers rallied at least 3.3 percent to propel Wednesday’s advance. Industrial, utilities and phone companies added more than 1.1 percent. Financials finished little changed, after earlier losing nearly 3 percent, as banks pared a selloff. Technology shares slipped 0.4 percent, trimming a drop of as much as 2 percent.

Raw-materials producers rose as commodity prices rallied amid a weaker dollar, with the Bloomberg Dollar Spot Index touching its lowest level in almost seven years. Newmont Mining Corp. and Freeport-McMoRan Inc. surged at least 11 percent, with Newmont capping its biggest gain since 2008.

“I’m looking at the dollar breaking through support levels and it’s the biggest move we’ve seen in a while,” said LPL Financial’s Canally. “It’s becoming less and less of a headwind for corporations, and today it’s certainly less of a headwind for oil.”

Murphy Oil Corp. and Chesapeake Energy Corp. climbed at least 10 percent to lead the advance among energy companies. West Texas Intermediate crude futures jumped 8 percent, after erasing a drop of as much as 1.6 percent, as the falling dollar countered any concerns about U.S. crude inventories rising to more than 500 million barrels for the first time since 1930.

Retailers were a drag on consumer discretionary shares as Inc. fell 3.8 percent, down for a fourth day to the lowest since Oct. 1. Lowe’s Cos. tumbled 6.2 percent after agreeing to buy rival Rona Inc. for C$3.2 billion ($2.3 billion) in cash to create one of Canada’s biggest home-improvement retailers. Home Depot Inc. dropped 1.2 percent.

A day after wresting away the crown of most valuable company from Apple Inc., Google parent Alphabet Inc. gave it right back as its A class shares sank 4 percent, the most since August. Apple added 2 percent. Microsoft Corp. and Facebook Inc. fell more than 1.5 percent to weigh on the technology group. Autodesk Inc. rallied 8 percent, its biggest in three months amid a restructuring plan that includes cutting about 10 percent of its staff.

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