Benchmarks finished in the green on Monday following rebound in oil prices and strong gains in Apple’s shares. Oil prices reached its highest settlement in six months, which in turn boosted energy stocks. Additionally, tech stocks rose following Apple’s gains. All the three key U.S. indexes ended in positive territory yesterday recovering strongly from their third straight weekly drops.
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The Dow Jones Industrial Average (DJI) increased 1%, or 175.39 points to close at 17,710.71. The S&P 500 also rose 1% to close at 2,066.66. The tech-laden Nasdaq Composite Index closed at 4,775.46, gaining 1.2%. The fear-gauge CBOE Volatility Index (VIX) decreased 2.4% to settle at 14.68. A total of around 6.5 billion shares were traded on Monday, lower than the last 20-session average of 7.2 billion shares. Advancers outpaced declining stocks on the NYSE. For 74% stocks that advanced, 23% declined.
Oil prices rebounded yesterday after Goldman Sachs Group, Inc. (GS) reportedly said that oil market is facing a deficit in crude production following production disruptions in Nigeria and Canada. Goldman also said that "the oil market has gone from nearing storage saturation to being in deficit much earlier than" the company expected.
A few months ago, Goldman Sachs forecasted that oil prices would remain around $20 per barrel following crude oversupply. However, yesterday it projected that WTI crude may reach near $50 per barrel in second half of this year and might register modest increases next year. Both the WTI crude and Brent crude rose 3.2% and 2.3% to $47.72 per barrel and $48.97 a barrel, respectively, settling at their highest level since Nov 3.
Rise in oil prices led the Energy Select Sector SPDR (XLE) to increase 1.7% to become one of the biggest gainers among the S&P 500 sectors. Dow components Chevron Corp (CVX) and Exxon Mobil Corp (XOM) rose 1.5% and 1%, respectively. Other key energy stocks including, Williams Companies, Inc. (WMB), Apache Corp. (APA), Halliburton Company ( HAL), EOG Resources, Inc. (EOG), Pioneer Natural Resources Co. (PXD) and Schlumberger Limited (SLB) advanced 6.4%, 3.4%, 2.9%, 2.6%, 1.6% and 2.2%, respectively.
Moreover, shares of Apple Inc. (AAPL) advanced 3.7% after a regulatory filing by Warren Buffett's Berkshire Hathaway Inc. (BRK.B) revealed that the company has acquired 9.8 million shares or a $1 billion stake in Apple during the first quarter. This was Apple’s best one-day performance since March.
Increase in Apple’s shares boosted the tech-based index Nasdaq to finish in the green. It also had a positive impact on the Technology Select Sector SPDR (XLK), which rose 1.4%. Some of its major components including Alphabet Inc. (GOOGL), Oracle Corporation (ORCL), Intel Corporation (INTC), Broadcom Limited (AVGO), Microsoft Corporation (MSFT), Visa Inc. (V) and International Business Machines Corporation (IBM) increased 0.8%, 0.9%, 1.6%, 1.9%, 1.5%, 1.3% and 1.2%, respectively. All the 12 S&P 500 sectors ended in positive territory.
Gains in biotech shares also helped the Nasdaq end the day higher. The iShares Nasdaq Biotechnology (IBB) increased 3.1%, posting its highest increase since Apr 6. Biotech shares surged yesterday after Pfizer Inc. (PFE) announced that it will acquire Anacor Pharmaceuticals, Inc. (ANAC) for $99.25 per share or $5.2 billion in cash and debt. While shares of Anacor soared 57.2% following the news, Pfizer’s shares ended with a gain of 0.6%.
In economic news, the Empire State Manufacturing Survey Index came in at a negative 9.02 in May, in contrast to a positive of 9.56 in April and consensus estimate of positive 5.8.
Separately, the National Association of Home Builders (NAHB) reported that home builder sentiment index (HMI) remained flat at 58 in May, for the fourth consecutive month.
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