U.S. Stocks Steady, Despite Pressure From Lower Oil Prices
Energy shares tumble on concerns about higher production in Iran, China’s economy
U.S. stocks edged higher Monday, though a slump in energy shares kept a lid on the gains.
The Dow Jones Industrial Average inched up 14.57 points, or 0.1%, to 17230.74, and the S&P 500 edged 0.03%. Energy companies were the biggest drag on the S&P 500, falling 1.9%, and Chevron Corp. and Exxon Mobil Corp. were the largest decliners in the Dow industrials, taking about 18 points off the index.
The Nasdaq Composite, which has a lighter oil-and-gas company weighting, rose 0.4%.
Crude oil fell 2.9% to $45.89 in recent trading, pressured in part by comments from Iran’s oil minister on Monday that he expects the country to boost production by 500,000 barrels a day in the coming months and that it has committed buyers. China’s report that its economy grew 6.9% in the third quarter also weighed on oil prices amid concerns about a slowdown in the world’s second-biggest oil consumer.
While the growth rate of China’s economy has fallen to its weakest level since 2009, the indicator was slightly better than expected. Economists polled by The Wall Street Journal had forecast China’s third-quarter growth at 6.8%.
“Overall investors are getting used to the idea that we’re in a sub-seven percent growth environment in China,” said Joseph Quinlan, chief market strategist at U.S. Trust. “Energy is a different story, it’s getting pulled down by the number, but if this number had come out a year ago there would be a lot more angst and anxiety.”
The Stoxx Europe rose 0.3%, while Asian markets were mixed. China shares initially gained after the release, but the Shanghai Composite Index closed 0.1% lower, tracking other Asian shares.
The pause comes after three weeks in a row of gains for U.S. stocks. After a sharp selloff in August, major U.S. benchmarks have steadily climbed back. The Dow industrials and the S&P 500 are up 5.8% and 5.9%, respectively, so far this month.
U.S. corporate earnings season is helping push stocks higher, investors said. At the end of the third quarter investor expectations for corporate profits were gloomy, with analysts expecting earnings in the S&P 500 to decline 5.1%. Including results from 63 companies, earnings in the index are on track to slip 5% in the third quarter, according to FactSet.
“Earnings are good enough right now to help stop the selloff of August and September,” said Brett Mock, managing director at brokerage JonesTrading Institutional Services LLC. “Earnings have been important in the sense of providing visibility and stopping the bleeding.”
On Monday, Morgan Stanley’s profit fell sharply amid drops in the bank’s trading business. Shares fell 4.8%.
In other corporate news, shares of Weight Watchers International Inc. more than doubled after it reported Oprah Winfrey is taking a 10% stake and joining the weight-loss company’s board.
Monday’s moves follow a week of gains for global stock markets, driven by better-than-expected third-quarter results and expectations that the U.S. Federal Reserve will wait to raise interest rates from current near-zero levels, after lackluster U.S. economic data. Ultralow interest rates in developed economies have buoyed stock markets in recent years as investors have sought higher yielding returns.
Looking to the week ahead, investors are awaiting more clues from European Central Bank President Mario Draghi on the possible extension of the ECB’s stimulus program at its meeting Thursday. Barclays expects more monetary easing to be announced by the end of the year. “It is just a matter of time until the ECB decides to drive the euro lower,” its analysts said in a note.
In other markets, the yield on the 10-year Treasury note rose to 2.028%. Yields rise as prices fall.
In commodities, gold was down 0.9% at $1,173.30 a troy ounce.
Source: WSJ – U.S. Stocks Steady, Despite Pressure From Lower Oil Prices
