Plunging Dollar Helps Oil Prices Surge
The U.S markets moved higher yesterday in direct response to the price of oil steadily rising.
Tuesday, June 7, 2016 - 00:00
In early afternoon trading, The Dow Jones was up 0.41% and the Standard & Poor’s 500 index (S&P 500) had risen up 0.44%, while the Nasdaq was also up 0.17%. The S&P 500 edged toward the highest close since July as energy shares advanced with the price of crude and global equities climbed amid optimism that the Federal Reserve won’t rush to raise rates amid signs of moderate growth in the world’s largest economy.
OIL Benchmark United States crude oil gained 38 cents to trade back above $50 a barrel at $50.07 on the New York Mercantile Exchange. Brent crude, which is used to price international oils, added 59 cents to $51.14 a barrel in London. Chevron stock rose 2.2%, while Newfield Exploration stock added 5%. Shares of Helmerich & Payne gained 3.6%.
The dollar plunged after Friday’s jobs report as investors concluded that the Federal Reserve would not raise interest rates soon. That has helped energy companies by putting upward pressure on the price of crude oil. The Fed is now being perceived to be lower for longer on interest rates, with a dollar that is less likely to rally in lieu of that, and an economy that may be slowing down but is not in recession. All off this creates a perfect confluence for oil and energy stocks to climb. Utilities have paced gains in the S&P 500 this year, advancing 15%, just ahead of the gains among energy producers.
The dollar declined against most major currencies as traders took Yellen’s latest words to mean U.S. policy makers aren’t in a hurry to raise interest rates. The pound was 0.8% percent higher. Sterling has fluctuated in recent weeks, depending on which side of the EU referendum argument was gaining momentum. Sterling’s climb comes after it dropped in early trading Monday, as three polls were released showing more Britons favor quitting the EU than staying. Two more surveys that came later the same day showed slim leads for the “Remain” camp.
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