While you were sleeping: Oil gushes lifting equities

Thursday 18th December 2014

Wall Street rose as oil rebounded amid speculation it had fallen too far too fast and as investors positioned for the last policy statement of the year from the US central bank.

In afternoon trading in New York, the Dow Jones Industrial Average climbed 0.93 percent, the Standard & Poor’s 500 Index strengthened 0.91 percent, while the Nasdaq Composite Index gained 0.73 percent.

Gains in shares of Chevron and those of McDonald’s, last up 3.7 percent and 3.1 percent respectively, led the Dow higher. Shares of Exxon also rose, last up 2.7 percent.

All eyes are on the end of the Federal Open Market Committee meeting which will be followed by a statement, updated forecasts and a press conference by Fed Chair Janet Yellen later in the day. Particular attention will be paid to whether the Fed will scrap its promise to keep interest rates close to zero for “a considerable time.”

"There does seem to be a lot of focus on the language, but I don’t know that the removal of the language, even if it happens, really brings the date of rate increases any closer if the data doesn’t support it," Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, told Reuters.

Meanwhile, the slump in the price of oil has already shown up in the spending behaviour of the all mighty US consumer. And a Labor Department report showed that the consumer price index dropped 0.3 percent in November, the largest decline since December 2008.

"The collapse in oil prices is unambiguously good for the US economy,” Paul Ashworth, chief US economist for Capital Economics, told Reuters.

Oil found buyers in New York today, pushing prices almost 5 percent higher. Brent for February delivery was recently up US$2.33 at US$62.34 a barrel, while US crude's front month contract was US$1.90 higher at US$57.83.

Shares of FedEx dropped, last down 4.4 percent, after the company reported quarterly earnings that fell short of expectations. Also considered disappointing was that the company stuck by its 2015 outlook.

In further deal news, shares of Volcano Corp, a medical device maker, soared 55.3 percent after Royal Philips agreed to buy the company for US$1 billion.

“While this transaction will bolster Philips’s presence in image guided therapy, a segment with above average growth and margin potential, it comes at a high price,” Peter Olofsen, an Amsterdam based analyst at Kepler Cheuvreux, wrote in a note, Bloomberg News reported.

In Europe, the Stoxx 600 Index finished the session with a 0.1 percent gain from the previous close, recovering from a decline of 1.1 percent earlier in the day. The UK’s FTSE 100 Index added 0.1 percent, while France’s CAC 40 Index rose 0.5 percent. Germany’s DAX Index fell 0.2 percent.

BusinessDesk.co.nz

Comments from our readers

No comments yet