US stocks inch higher on hope for more oil deals
Energy companies led US stocks higher on Tuesday as investors hoped higher oil prices and bigger profits are on the way.
News of two deals in the energy sector also helped send those stocks higher as traders anticipated that more consolidation could follow. Spectra Energy agreed to be acquired for 28 billion dollars and Yates Petroleum said it would be bought for 2.3 billion dollars.
"What's driving the stocks today is a view that some consolidation might take some costs out and drive up profits," said Jim McDonald, chief investment strategist for Northern Trust.
The Dow Jones industrial average gained 46.16 points, or 0.2%, to 18,538.12. The Standard & Poor's 500 index rose 6.50 points, or 0.3%, to 2,186.48. The Nasdaq composite added 26.01 points, or 0.5%, to close at 5,275.91, an all-time high.
Investors were once again getting their hopes up for an agreement among oil producing countries to reduce output and mitigate a supply glut that has knocked oil prices lower.
On Tuesday Iran's oil minister said his country would support an effort by Opec to stabilise the oil market. Because Iran is boosting its oil production after years of sanctions, it has opposed efforts to limit oil production.
Oil prices did not change much on the day. Benchmark US crude oil added 39 cents to 44.83 dollars a barrel in New York. Brent crude, the benchmark for international oil prices, lost 37 cents to 47.26 dollars a barrel in London.
The market wobbled in the morning after a survey was released showing a sharp slowdown in the US service sector last month. That helped send shares of consumer companies and banks lower. It also sent prices for precious metals, bonds, and high-yielding utility and phone company stocks higher.
The Institute for Supply Management said US service companies grew at a far slower pace in August than they had in July. While service firms have expanded every month for six and a half years, the ISM reported its weakest service industry reading since February 2010. New orders and hiring grew at a slower rate and exports fell. Service firms accounted for almost all of US job creation last month.
Some of the biggest gains went to utility and phone companies, traditional safe-play stocks. Investors also snapped up government bonds, sending prices higher and yields lower. That echoed a pattern seen when the market was plunging early this year. AES added 61 cents, or 5%, to 12.84 dollars and NextEra Energy rose 2.16 dollars, or 1.8%, to 125.29 dollars.
The yield on the 10-year Treasury note declined to 1.53% from 1.61% late Friday. The dollar sank to 102.08 yen from 103.94 yen Friday. The euro rose to 1.1253 dollars from 1.1159 dollars.
Metals priced jumped. Gold gained 27.30 dollars, or 2.1%, to 1,354 dollars an ounce. Silver rose 77 cents, or 4%, to 20.14 dollars an ounce. Copper picked up one cent to 2.09 dollars a pound.