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Energy companies lead indexes higher as oil price soars

Published 15/11/2016

The closing number for the Dow Jones industrial average as energy companies led the stock market higher (AP)
The closing number for the Dow Jones industrial average as energy companies led the stock market higher (AP)

US stocks climbed on Tuesday as the price of oil made its biggest jump in seven months and energy companies rose with it.

Technology stocks such as Microsoft and Google's parent Alphabet traded higher and bond yields slipped, a break with the pattern since last week's election.

Oil rose almost 6% as investors once again grew hopeful that the Opec cartel will agree to cut fuel production in a few weeks.

Companies such as utilities and telecom service providers climbed as bond yields fell slightly after a week of large gains. Airlines rose after Warren Buffett made a surprise investment in three carriers.

"The market somehow decided 'let's give the Trump presidency a chance," said John DeClue, chief investment officer for US Bank's private client reserve.

However Mr DeClue said the bond market could struggle with Donald Trump in the White House: if taxes are cut and government spending rises sharply, that could lead to climbing deficits that would trouble investors in US government debt.

The Dow Jones industrial average picked up 54.37 points, or 0.3%, to 18,923.06, as those gains were partly held back by losses for retailer Home Depot and aerospace company Boeing. The Standard & Poor's 500 index rose 16.19 points, or 0.7%, to 2,180.39. The Nasdaq composite added 57.23 points, or 1.1%, to 5,275.62.

Energy companies such as Exxon Mobil and Occidental Petroleum made large gains as the price of oil rose by the largest amount since early April. At least for a day, investors were hopeful that the nations of Opec will be able to hammer out a deal to cut oil production, which would boost prices. Opec agreed to a preliminary deal in September but still has to work out important details.

Benchmark US crude gained 2.49 dollars, or 5.7%, to 45.81 dollars per barrel in New York. Brent crude, used to price international oils, rose 2.52 dollars, or 5.7%, to 46.95 dollars a barrel in London. Exxon rose 1.54 dollars, or 1.8%, to 86.82 dollars and Apache added 4.46 dollars, or 7.6%, to 63.39 dollars.

Tuesday's trading was a partial reversal of the moves investors have made since the presidential election one week ago. Tech stocks have been losing ground recently, but Microsoft picked up 1.14 dollars, or 2%, to 58.87 dollars and graphics processor maker Nvidia rose 2.55 dollars, or 3%, to 86.19 dollars.

Bond prices edged higher, sending long-term interest rates slightly lower. Bond prices had fallen sharply since the election over worries that President-elect Donald Trump's spending plans would lead to higher inflation. That had sent yields to their highest levels this year. But the yield on the 10-year Treasury note declined to 2.23% from 2.27%. Companies that pay large dividends, such as phone companies, also changed course and rose.

However the dollar continued to get stronger and reached its highest level in almost a year. It rose to 109.32 yen from 108.51 yen. The euro slid to 1.0718 dollars from 1.0726 dollars.

Billionaire investor Warren Buffett's Berkshire Hathaway bought stock in United Continental, American Airlines and Delta. Mr Buffett has avoided the volatile industry in the past, but his holding company disclosed stakes in each company in a form filed with the Securities and Exchange Commission. United picked up 3.12 dollars, or 5%, to 66.06 dollars and American gained 1.36 dollars, or 3.1%, to 44.76 dollars.

Aerospace giant Boeing fell after United said that it will postpone delivery of 61 new Boeing 737 jets that it planned to buy. It will convert the orders to a new, more fuel-efficient model that Boeing calls the 737 Max. Boeing stock lost 1.88 dollars, or 1.3%, to 148.11 dollars.

Retail sales climbed 0.8% in October as consumers spent more money on products including cars and home and garden supplies. Retail sales over last two months have been the strongest in more than two years, which shows consumers are still spending.

The report showed continued gains for online retailers. Amazon jumped 24.17 dollars, or 3.4%, to 743.24 dollars while department stores traded lower as they continued to lose sales.

Equity One will combine with Regency Centre in a deal that combines two real estate investment trusts that own shopping centers. The two companies have more than 400 properties, most of them anchored by grocery stores. Equity One climbed 1.90 dollars, or 6.8%, to 29.77 dollars while Regency Centre lost 2.95 dollars, or 4.2%, to 66.91 dollars.

Chinese e-commerce company JD.com climbed after it reported strong quarterly results. The company also said it might reorganize its JD Finance unit, which runs its internet finance business. JD.com said expects to sell its stake in the company and that JD Finance will be owned solely by Chinese investors. The stock climbed 2.70 dollars, or 11.4%, to 26.41 dollars.

In other energy trading, wholesale gasoline rose six cents, or 4.5%, to 1.34 dollars a gallon. Heating oil picked up six cents, or 4.2%, to 1.44 dollars a gallon. Natural gas lost four cents to 2.71 dollars per 1,000 cubic feet.

Gold rose 2.80 dollars to 1,224.50 dollars an ounce. Silver picked up 15 cents to 17.04 dollars an ounce, while copper gave up two cents to 2.51 a pound dollars.

The FTSE 100 index rose 0.6 % and the CAC-40 in France was also 0.6 % higher. Germany's DAX gained 0.4 %. Seoul's Kospi shed 0.3 % and the Nikkei 225 in Japan finished little changed. Hong Kong's Hang Seng gained 0.5%.

AP

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