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Wall Street surge as Federal Reserve moves to calm fears of rate rises

Published 06/06/2016

It was an upbeat day for traders
It was an upbeat day for traders

Stocks jumped on Monday after Federal Reserve chair Janet Yellen again managed to soothe investors' jangled nerves.

The Standard & Poor's 500 index made its highest close in 2016, and oil prices also reached their highest levels of the year.

Market indexes were higher all day. They weakened a bit during Ms Yellen's remarks, but rose further as investors concluded that the Fed will not raise interest rates again until it is certain higher rates will not stall the economy. Energy companies made the biggest gains as oil prices increased. Banks rose as investors anticipated that interest rates will eventually rise.

Investment manager Luke Bartholomew of Aberdeen Asset Management said Ms Yellen was non-committal following a weak jobs report on Friday. But Bartholomew said the Fed's decision won't be based on a single report or economic indicator.

"There's still a lot of data to go," he said.

The Dow Jones industrial average gained 113.27 points, or 0.6%, to 17,920.33. The S&P 500 rose 10.28 points, or 0.5%, to 2,109.41. The Nasdaq composite index picked up 26.20 points, or 0.5%, to 4,968.71. The Nasdaq is close to its highs for the year.

Ms Yellen's remarks come after the government released a surprisingly weak jobs report for May on Friday. Ms Yellen, who called that report "disappointing", had said recently that the Fed would probably raise interest rates in the next few months if the economy kept getting stronger. She did not repeat that comment on Monday, and investors concluded that the Fed will not raise interest rates until it is certain that doing so will not stall the economy.

Benchmark US crude oil rose 1.07 US dollars, or 2.2%, to 49.69 dollars a barrel in New York. That is its highest closing price this year. Brent crude, which is used to price international oils, gained 91 cents, or 1.8%, to 50.55 dollars a barrel in London. That brought energy companies higher. Exxon Mobil added 97 cents, or 1.1%, to 89.34 dollars.

Independent energy analyst Jim Ritterbusch said oil prices rose because the dollar has weakened since the disappointing jobs report, and acts of sabotage in Nigeria have sapped the country's oil production, boosting crude prices.

The price of oil has rebounded over the last few months, but it is far lower than it was two years ago. That is causing a lot of pain for energy companies.

Oil and gas exploration company Devon Energy said Monday it will sell almost one billion US dollars in assets later this year to shore up its financial position.

That sent its stock up 1.64 dollars, or 4.6%, to 37.56 dollars. Oilfield services company Hercules Offshore filed for Chapter 11 bankruptcy protection for the second time in less than a year. Hercules plans to sell all of its assets to pay off investors, including international divisions. Its stock lost 9 cents, or 6.4%, to 1.32 dollars.

Rival oilfield service company Halliburton gained 2.04 dollars, or 4.8%, to 44.89 dollars and Baker Hughes rose 3.28 dollars, or 7.1%, to 49.52 dollars. Drilling rig company Transocean jumped 1.43 dollars, or 14.7%, to 11.17 dollars after Barron's reported the company won a contract for an operation that will be based off of India.

CF Industries climbed 2.54 dollars, or 8.9%, to 31.15 dollars and Mosaic rose 1.66 dollars, or 6.2%, to 28.36 dollars. That helped pull materials and chemicals companies higher.

Drugmaker AbbVie slid after investors were disappointed with results from a study of a lung cancer drug AbbVie is acquiring. In April AbbVie agreed to buy StemCentrx for 5.8 billion dollars, gaining the company's stem cell treatment ova-T in the process. But after the results were announced, AbbVie declined 2.18 dollars, or 3.4%, to 62.82 dollars.

Food producer Tyson Foods slumped after a BMO Capital Markets analyst downgraded the food company to Market Perform. Tyson stock fell 2.33 dollars, or 3.7%, to 60.88 dollars but is up 49% over the last 12 months.

Gold gained 4.50 dollars to 1,247.40 dollars an ounce. Silver rose eight cents to 16.45 dollars an ounce. Copper was little changed at 2.12 dollars a pound.

In other energy trading, wholesale petrol lost two cents to 1.59 dollars a gallon. Heating oil gained 2 cents to 1.50 dollars a gallon. Natural gas rose seven cents, or 2.8%, to 2.47 dollars per 1,000 cubic feet.

The FTSE 100 index of leading British shares jumped 1% as polls showed voters in the UK want the nation to leave the European Union. Britain will hold a referendum on membership in the 28-nation bloc on June 23 and campaigning is heating up. The British pound weakened based on the latest polls.

Elsewhere Germany's Dax rose 0.2% and France's Cac 40 was little changed. Japan's Nikkei 225 fell nearly 0.4% and Hong Kong's Hang Seng added 0.4%.

Bond yields recovered after a big drop on Friday. As bond prices fell, the yield on the 10-year U.S. Treasury note rose to 1.74% from 1.70%. The dollar rose to 107.40 yen from 106.68 yen. The euro inched up to 1.1373 from 1.1347 dollars.

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