U.S. Stocks Extend Rally as Commodity Producers Continue Rebound

  • Energy, raw-materials up at least 17% from recent lows
  • Nasdaq 100 closes at record, S&P 500 at highest since July

U.S. stocks extended a rally, with the Standard & Poor’s 500 Index reaching a three-month high, as beaten-down commodity producers continued to pace the recovery from a third-quarter rout.

Chevron Corp. and Exxon Mobil Corp. gained more than 1.8 percent as crude oil climbed to a three-week high. The energy group has rebounded 22 percent from an August low. Copper producer Freeport-McMoRan Inc. increased 5 percent today, while raw-material companies in the benchmark index have surged nearly 18 percent in the last five weeks. Gains have come as the Federal Reserve kept interest rates pinned near zero and other central banks signaled their willingness to boost stimulus.

The S&P 500 rose 0.3 percent to 2,109.79 at 4 p.m. in New York, to close 1 percent below its all-time high set in May. The Dow Jones Industrial Average added 89.39 points, or 0.5 percent, to 17,918.15 after yesterday erasing its loss for the year. The Nasdaq 100 Index, the first major U.S. stock gauge to retake a multiyear high established earlier in 2015, climbed 0.3 percent to a record for the first time since the dot-com bubble.

“We’re back to where we were before that downturn took place, with reasonable earnings, modest growth and low interest rates,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania. “That’s a backdrop that’s allowing upward momentum to re-enter the market. All of the fears built into the market in August and September haven’t come to fruition.”

The S&P 500 has rallied 13 percent since bottoming amid an August selloff that sent the benchmark into its first correction in four years. Fading concern that China’s slowdown will spread, optimism for further stimulus from central banks overseas and better-than-expected U.S. corporate earnings have all have a hand in propelling the recovery.

As the Fed boosted prospects of an interest-rate increase last month, investors continue to look to data to gauge whether the world’s largest economy can withstand higher borrowing costs. A report today showed factory orders slipped more than expected in September, while the prior month’s decline was steeper than previously reported. That comes a day after separate data showed manufacturing activity remained stuck in neutral in October.

Traders are pricing in a 50 percent chance of liftoff at the Fed’s December meeting. Fed Chair Janet Yellen, Vice Chair Stanley Fischer and New York Fed’s William Dudley are all scheduled to deliver remarks on Wednesday.

Investors will also look to earnings for a read on the health of the economy. Time Warner Inc., Allergan Plc and Facebook Inc. are among more than 100 S&P 500 companies releasing results this week. Of those that have reported this season, about 74 percent exceeded profit projections, while 56 percent missed sales forecasts. Analysts now estimate earnings dropped 3.9 percent in the third quarter, up from predictions for a 6.1 percent decline a week earlier.

The Chicago Board Options Exchange Volatility Index rose 2.8 percent Tuesday to 14.54, up for the third time in four sessions and reversing an earlier 2.4 percent decline. The measure of market turbulence known as the VIX posted its biggest monthly drop ever in October. About 7.5 billion shares traded hands on U.S. exchanges today, in line with the three-month average.

Energy companies led gains among the S&P 500’s 10 main groups for a third session as oil rallied for the fourth time in five days. Shares of consumer staples and phone companies declined the most.

“When you see energy and cyclicals continue to rally like this it’s because they’re under-owned sectors,” said Michael Antonelli, an institutional equity sales trader at Robert W. Baird & Co. “They’re the sectors that were left for dead. When you get these pain-trade rallies like we’re seeing right now, those are the sectors that people go to because they’re under-owned.”

Visa Inc., Apple Inc. and Microsoft Corp. increased more than 1.1 percent to help send technology companies in the benchmark index to a 15-year high. The sector is up about 19 percent from an August low, with the rebound boosted last month by stronger-than-expected profits at Microsoft and Google parent Alphabet Inc.

Consumer discretionary shares reached a record, with Wynn Resorts Ltd. up 2.9 percent, and L Brands Inc. rising 3 percent to an all-time high as the owner of the Victoria’s Secret lingerie brand posted stronger-than-expected preliminary results.

Diamond Offshore Drilling Inc. and Consol Energy Inc. increased more than 4.8 percent, with both extending their two-day climb to at least 18 percent. The energy group has kicked off November with a 5 percent rally, reaching the highest level since July 17.

Mosaic Co. gained 5.9 percent, its strongest advance in four years, to lead raw-materials higher. The fertilizer maker posted a better-than-estimated quarterly profit, while it also trimmed its full-year outlook on capital expenditures. Alcoa Inc. and Monsanto Co. rose more than 2.2 percent.

King Digital

King Digital Entertainment Plc jumped 15 percent to its highest in more than a year after the maker of the Candy Crush game agreed to a $5.9 billion takeover from Activision Blizzard Inc. Activision advanced 3.6 percent to an all-time high. Mobile-game maker Zynga Inc. climbed 2.5 percent.

Archer-Daniels-Midland Co. lost 6.8 percent, the most in four years, to drag on consumer staples. The world’s largest corn processor reported third-quarter earnings that missed analysts’ estimates as ethanol margins shrank and the stronger dollar curbed U.S. exports of the grain. Kellogg Co. slumped 3.6 percent as third-quarter revenue trailed estimates after sales of breakfast foods slumped and currency fluctuations ate into revenue.

American International Group Inc. lost 4.4 percent, its biggest drop in two months, after reporting a third-quarter loss and lower-than-expected operating income. Chief Executive Officer Peter Hancock also dismissed activist investor Carl Icahn’s proposal to split the company into three insurers.

Martin Marietta Materials Inc. slumped 8.5 percent, the most since 2008. The largest U.S. producer of crushed stone reported third-quarter profit and sales that missed analysts’ estimates on a sluggish nonresidential market.

Fidelity National Information Services Inc. tumbled 12 percent, the worst performance in the S&P 500. The payment services provider fell the most in 13 years after third-quarter revenue missed expectations while earnings were in line.

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