Stocks Move Sharply Higher Amid Jump In Oil Prices - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Monday, partly offsetting the pullback seen over the past few weeks. With the gains on the day, the Dow and the S&P 500 rebounded after ending last Friday's trading at their lowest closing levels in a month.

The major averages pulled back off their highs going into the close but still ended the day firmly positive. The Dow surged up 175.39 points or 1 percent to 17,710.71, the Nasdaq soared 57.78 points or 1.2 percent to 4,775.46 and the S&P 500 jumped 20.05 points or 1 percent to 2,066.66.

The rally on Wall Street came amid a sharp increase by the price of oil, which extended the upward move seen last week.

After advancing $1.55 or 3.5 percent to $46.21 a barrel in the previous week, crude oil for June delivery jumped $1.51 to $47.72 a barrel.

The price of crude oil reached its highest closing level in over six months, as supply disruptions in Nigeria led Goldman Sachs to raise its price forecast.

On the U.S. economic front, the New York Fed released a report this morning showing an unexpected decline in regional manufacturing activity in the month of May.

The New York Fed said its general business conditions index slid to a negative 9.0 in May from a positive 9.6 in April. A negative reading indicates a contraction in regional manufacturing activity.

Economists had expected the index to show a much more modest decrease, with the consensus estimate calling for a positive reading of 7.0.

A separate report from the National Association of Home Builders said homebuilder confidence held steady in May.

The report said the NAHB/Wells Fargo Housing Market Index came in at 58 in May, unchanged from the three previous months. Economists had expected the index to inch up to 59.

Traders were also digesting some disappointing Chinese economic data, which raised concerns about the global economy but also generated optimism about the possibility of further stimulus.

Reports from the Chinese National Bureau of Statistics showed weaker than expected growth in industrial production, retail sales, and fixed asset investment.

Sector News

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 2.9 percent. The index continued to regain ground after falling to its lowest closing level in well over a month last Thursday.

Agios Pharmaceuticals (AGIO), Alkermes (ALKS), and Novavax (NVAX) turned in some of the biotech sector's best performances on the day.

Considerable strength was also visible among gold stocks, as reflected by the 2.7 percent gain posted by the NYSE Arca Gold Bugs Index. The strength is sector came as gold for June delivery rose $1.50 to $1,274.20 an ounce.

Energy stocks also saw significant strength on the day, benefiting from the sharp increase by the price of crude oil. The Philadelphia Oil Service Index surged up by 2 percent, while the NYSE Arca Oil & Gas Index jumped by 1.8 percent.

Semiconductor, chemical, software and airline stocks also showed strong moves to the upside, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.

Meanwhile, the major European markets turned in a mixed performance on the day, with the German market closed for a holiday. While the U.K.'s FTSE 100 Index crept up by 0.2 percent, the French CAC 40 Index edged down by 0.2 percent.

In the bond market, treasuries showed a notable move to the downside amid the rally on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.8 basis points to 1.753 percent.

Looking Ahead

While the price of crude oil is likely to remain in focus on Tuesday, reports on consumer prices, housing starts, and industrial production will also attract attention.

Trading could also be impacted by reaction to earnings news from Home Depot (HD), as the home improvement giant is due to release its first quarter results before the start of trading.