Stocks Rally Amid Sharp Jump In Crude Oil Prices - U.S. Commentary

(RTTNews) - With energy stocks leading the way higher, considerable strength was visible on Wall Street during trading on Wednesday. The gains on the day extended a recent upward move, with the major averages closing higher for the third straight day.

The major averages ended the day just off their highs for the session. The Dow jumped 185.34 points or 1.1 percent to 17,602.61, the Nasdaq advanced 44.82 points or 0.9 percent to 5,045.93 and the S&P 500 surged up 25.32 points or 1.2 percent to 2,064.29.

The strength on Wall Street was partly due to a substantial increase by the price of crude oil, which climbed further off its recent lows.

Crude for February delivery jumped $1.36 to $37.50 a barrel amid the release of a report unexpectedly showing a sharp drop in crude oil inventories.

The report from the Energy Information Administration said crude oil inventories tumbled by 5.9 million barrels in the week ended December 18th compared to expectations for an increase of 1.1 million barrels.

The gains seen over the past few days have partly offset the sharp pullback seen late last week, with traders doing some window dressing as the year winds down.

Traders were also reacting to a slew of U.S. economic data, including a report from the Commerce Department showing that new home sales increased for the second consecutive month in November.

The Commerce Department said new home sales climbed 4.3 percent to an annual rate of 490,000 in November from the revised October rate of 470,000.

A separate report from the University of Michigan showed that consumer sentiment improved by more than initially estimated in December.

The report said the final reading on the consumer sentiment index for December came in at 92.6 compared to the preliminary reading of 91.8 and the final November reading of 91.3.

Before the start of trading, the Commerce Department released a report showing that personal income and spending rose at the same rate in the month of November.

The report said personal income increased by 0.3 percent in November after climbing by 0.4 percent in October. Economists had expected income to edge up by 0.2 percent.

The Commerce Department said personal spending also rose by 0.3 percent in November, while revised data showed spending was unchanged in October. The increase in spending matched economist estimates.

The spending component of the report was inadvertently released last night, well ahead of the scheduled release this morning.

A separate report from the Commerce Department showed that durable goods orders were virtually unchanged in November after surging up by 2.9 percent in October. Orders had been expected to pull back by about 0.5 percent.

Sector News

Energy stocks saw substantial strength throughout the session, climbing further off their recent lows amid the sharp jump by the price of crude oil.

Reflecting the strength in the energy sector, the NYSE Arca Natural Gas Index soared by 6.9 percent, while the NYSE Arca Oil & Gas Index and the Philadelphia Oil Service Index shot up by 4.4 percent and 4.2 percent, respectively.

Significant strength was also visible among steel stocks, as reflected by the 3.8 percent gain posted by the NYSE Arca Steel Index. With the gain, the index climbed further off the record closing low set last Friday.

Gold stocks also turned in a strong performance on the day, resulting in a 2.3 percent gain by the NYSE Arca Gold Bugs Index. The strength in the sector came even though the price of gold closed lower.

Chemical, telecom, railroad, and computer hardware stocks also saw considerable strength, 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 on Wednesday, although the Japanese markets were closed on the day. Hong Kong's Hang Seng Index surged up by 1 percent, while Australia's All Ordinaries Index rose by 0.5 percent.

The major European markets showed substantial moves to the upside on the day. While the U.K.'s FTSE 100 Index soared by 2.6 percent, the French CAC 40 Index and the German DAX Index both jumped by 2.3 percent.

In the bond market, treasuries moved to the downside, extending the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 2.264 percent.

Looking Ahead

Trading activity on Thursday is likely to be somewhat subdued due to the early close for Christmas Eve, although traders are still likely to keep an eye on a report on weekly jobless claims.