Stock Market News for February 23, 2016
Benchmarks ended in the green following sharp increase in oil prices. Positive outlook by the International Energy Agency (IEA) and OPEC secretary general’s encouraging comments moved oil prices upward. Rising oil prices boosted energy stocks and eventually had a positive impact on broader market. Meanwhile, increase in copper prices also boosted material stocks. Separately, gains in United Technologies pushed the Dow upward.
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The Dow Jones Industrial Average (DJI) advanced 1.4%, or 228.67 points, to close at 16,620.66. The Standard & Poor’s 500 (S&P 500) increased nearly 1.5% to close at 1,945.50. The tech-laden Nasdaq Composite Index closed at 4,570.61, also rising 1.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 5.6% to settle at 19.38. A total of around 7.1 billion shares were traded on Monday, lower than the last 20-session average of 9.1 billion shares. Advancers outpaced declining stocks on the NYSE. For 76% stocks that advanced, only 22% declined.
The IEA forecasted that U.S. shale-oil production is likely to decrease by 600,000 barrels per day (bpd) in 2016. Further, IEA predicted an additional fall of 200,000 bpd next year. It also expects that global oil demand and supply may get stabilized by 2017. Also, oil prices rallied on Monday, following last week’s Baker Hughes’ (BHI) report which said that U.S. rig count had declined by 26 to 439. While WTI crude increased 6.2% to $31.48 a barrel, Brent crude rose 5.3% to $34.76 per barrel.
Meanwhile, secretary general of OPEC, Abdalla Salem El-Badri said that both the OPEC and non-OPEC countries are ready to coordinate in controlling the supply glut. Moreover, while talking about the initial steps to keep production level unchanged, El-Badri said that “if this is successful, maybe we can take other steps in the future.”
The Energy Select Sector SPDR (XLE) increased nearly 2.6% and was the biggest gainer among the S&P 500 sectors. Dow component Chevron Corp (CVX) increased 2.7%. Other key energy stocks including, Chesapeake Energy Corporation (CHK), Halliburton Company (HAL), Schlumberger Ltd ( SLB), Occidental Petroleum Corporation (OXY) and EOG Resources (EOG) rose 19.5%, 4.8%, 2.1%, 2% and 3.7% respectively.
Moreover, copper prices increased by four cents to $2.12 per pound, reaching a two week high after China’s copper imports increased in January. Reportedly, volume of refined copper imported by China jumped 7.8% to 323,870 tons last month. Increase in copper and oil prices boosted material stocks, which in turn helped the S&P 500 gain.
The Materials Select Sector SPDR (XLB) increased 1.9% and was one of the key gainers among the S&P 500 sectors. Its key components including, Freeport-McMoRan Inc. (FCX), Alcoa Inc. (AA), The Dow Chemical Company (DOW), LyondellBasell Industries N.V. ( LYB) and PPG Industries, Inc. (PPG) increased 14.6%, 13.2%, 1.7%, 3.1% and 1.1% respectively.
Separately, United Technologies Corp (UTX) and UnitedHealth Group Inc (UNH) were the leading gainers for the blue-chip index. Shares of UTX and UNH increased 4.7% and 3.1% respectively. Shares of UTX increased after it revealed it had conducted "preliminary, exploratory conversations about a range of potential collaborative options” with Honeywell International Inc. (HON) However, the company blamed "significant regulatory obstacles, customer concerns and valuation issues" for not extending the discussions further.
In economic news, financial data company Markit reported that the U.S. Manufacturing Purchasing Managers Index (PMI) declined to 51.0 in February from 52.4 in January and came down to its lowest level since October 2012.
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