U.S. Stocks Rebound From Rate-Move Rout as Energy Shares Rally

  • S&P 500 jumps 2.8 percent in best week since November
  • Energy producers surge most in two months as crude advances

U.S. equities investors found an unlikely tonic for interest-rate wounds: a recovery in oil prices.

The Standard & Poor’s 500 Index rose 2.8 percent in the holiday-shortened week, recouping all but 12 points of the two-day rout following the first rate hike in almost a decade on Dec. 16. Energy producers in the index rallied 4.6 percent in the 3 1/2 days for the best performance since October, as higher crude prices bolstered the year’s most beaten-down industry. The dollar held a three-day loss against the yen on Friday.

Crude’s rally led the biggest gain in commodities prices since October. A report showing that consumer spending buoyed the economy last quarter added to optimism that growth can accelerate even as rates rise. That’s a turnabout from the prior week, when stocks suffered the biggest two-day slide ever to follow the start of Federal Reserve tightening cycle amid concern global growth was faltering.

“We’ve seen some increases in the price of oil so people are maybe a little more interested in putting money to work at these prices,” said Mariann Montagne, who helps oversee $870 million as senior investment analyst at Gradient Investments Group. “The Fed hike really told us that things are improving and that the economy can support a rate hike. We have improving employment numbers and an economy that’s improving.”

The S&P 500 jumped 55.44 points to 2,060.99 in the week, as the biggest gain since November erased the index’s loss for the year and left it 3.3 percent below its May record. The index ended the prior week with a 3.3 percent rout in the two days following the Fed’s decision. The Dow Jones Industrial Average and Nasdaq Composite Index both advanced about 2.5 percent, their best weekly performance since Nov. 20. The dollar was little changed at 120.39 yen as of 7:25 a.m. in Tokyo Friday.

Oil and gas producers surged, buoyed by crude’s best week in four months. The group has been the least-loved in the S&P 500 this year, with an average 6 percent of shares outstanding borrowed and sold in bets the price will fall. Those wagers didn’t pay off, at least for one week. Eight of the 10 biggest gainers in the S&P 500 were in the energy industry, led by Oneok Inc.’s 27 percent increase.

All 10 main industries in the broader index advanced this week, with commodities producers rallying 4.3 percent as metals from copper to gold advanced. The Bloomberg Commodity Index added 1.3 percent. Financials rallied 3 percent, while industrials saw their first gain after a four-week slump.

While equities ended Thursday lower after a three-day rally, a measure of investor anxiety fell for the second consecutive week amid light trading. The Chicago Board Options Exchange Volatility Index slid 23 percent, the most since July.

The S&P 500 has slipped 0.9 percent this month, on course for the worst December since 2002. It’s been buffeted by a series of sharp rallies and selloffs, even as Fed officials signaled their belief in the strength of the U.S. economy. The central bank raised rates for the first time since 2006 last week.

“A lot of investors positioning for 2016 are buying what’s been beaten up in 2015,” said Joe Quinlan, New York-based chief market strategist at U.S. Trust, Bank of America Private Wealth Management. “It’s also digesting the Fed move in the sense that it’s not the end of the world. Global growth is in good shape but not great shape.”

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