The S&P 500 suffered a second straight decline yesterday, but stocks bounced back in convincing fashion on Tuesday, led by energy companies.
By Peter Martin
Tuesday, September 16, 2014
Energy stocks have endured a rough patch in recent trading days, but have been boosted today by a sharp rise in the price of crude oil. US crude oil futures have gained more than 2%, joining Brent crude’s rally after OPEC’s secretary general said the cartel could trim its production quota by as much as 500,000 barrels a day next year. US crude oil futures were as high as $107 a barrel in the summer, but have tumbled since then to under $95 a barrel.
By mid-afternoon in New York, the Dow Jones Industrial Average was up 0.75% or 128 points at 17,159, while the broader-based S&P 500 index rose even more sharply, gaining 0.86% to break above the 2000 mark once again. The NASDAQ 100, which began the week with a heavy fall, bounced back 0.88% to 4065.5. The tech-heavy index’s big decline on Monday was speculated to have been caused by investor’s getting ready to plow cash into the much-anticipated Alibaba ($BABA) IPO set for later this week, but that theory doesn’t seem to hold in light of today’s strong advance, with NASDAQ high-flyers Facebook ($FB) and eBay ($EBAY)both climbing more than 1% on Tuesday.
As the Fed began the first day of its two-day FOMC meeting (the decision is due for 14.00 ET Wednesday) the latest economic data shows food and energy prices softening at the wholesale level, with prices as a whole unchanged. The Producer Price Index for final demand showed no change month-on-month in August, which was in line with expectations, slowing down after a 0.1% rise in July. The index rose 0.3% for services, but declined 1.5% for energy and 0.5% for food.
We will have a chance to see the latest numbers for inflation at the consumer level tomorrow with the pre-market release of the August CPI. Once again, no change is expected. CPI slowed to a change of just 0.1% in July after a 0.3% rise in June. Should expectations prove to be correct and no change is the actual result for August it will feed into a growing concern that, if anything, we should be worried about inflation being too low. With the Fed on a path to end stimulus in the next few months, it will be interesting to hear what Fed Chief Janet Yellen has to say about the inflation outlook, especially post-stimulus.
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