US: Stocks gain despite oil stocks' free fall

[NEW YORK] A free fall in petroleum stocks was the most striking element of an otherwise lackluster week on Wall Street.

All three indices finished higher for the holiday-shortened week, although the gains in both the Dow and S&P 500 were modest. Markets were closed Thursday for the Thanksgiving Day holiday and closed three hours early Friday.

The Dow tacked on 18.18 points (0.10 per cent) at 17,828.24, while the S&P 500 rose 4.06 (0.20 per cent) to 2,067.56. The tech-rich Nasdaq Composite Index jumped 78.66 (1.67 per cent) to 4,791.63.

For November as a whole, the Dow rose 2.52 percent, the S&P 500 2.45 per cent and the Nasdaq 3.47 per cent.

Petroleum stocks were on the defensive most of the week as investors warily awaited the Organization of the Petroleum Exporting Countries meeting Thursday in Vienna.

Opec had not been expected to respond aggressively to a roughly 35 per cent drop in oil prices since June. But the cartel did even less than many experts predicted, opting not even to promise to stop pumping above its current 30 million barrels per day production ceiling.

"Opec is clearly signaling that it will no longer bear the burden of market adjustment alone and this decision puts the onus on other producers, especially US tight oil to adjust as well," said Barclays.

On Friday, Dow members ExxonMobil and Chevron fell by 4.5 per cent and 5.5 per cent, respectively. Also falling were oil services companies like Halliburton (-10.9 per cent) and Nabors Industries (-12.9 per cent), as well as shale producers Continental Resources (-19.9 per cent) and EOG Resources (-7.8 per cent).

But the oil price drop had an upside, as airline stocks gained on expectations of lower fuel costs and retailers were lifted as the kickoff of the annual holiday shopping season coincided with an OPEC decision that many analysts see as a boost to consumers' disposable income.

"Lower gasoline prices are assisting in making holiday spending and confidence rather elevated. Even though consumer spending on gasoline is slightly less than three percent of disposable income, it plays a more significant role on consumer mood," said Chris Christopher, IHS Global Insight.

The National Retail Federation has predicted holiday sales this year will rise to US$616.9 billion, a 4.1 per cent increase from last year's level. Holiday sales accounted for about one-fifth of the retail industry's annual sales in 2013.

Key factors behind the better outlook include a lengthier holiday shopping season compared with last year, when Thanksgiving fell late in the calendar, and better overall economic data.

In terms of last week's economic reports, the biggest positive surprise was the Commerce Department's second estimate of US economic growth in the third quarter, which was revised to an annual rate of 3.9 per cent from 3.5 per cent. Analysts had expected a downward revision to the initial estimate.

Other reports were mixed. Data for October showed a slight increase in US consumer spending, a dip in consumer confidence, a rise in durable goods orders and a modest increase in new-home sales.

The reports, while somewhat disappointing, "weren't terrible," said Michael James, managing director of equity trading at Wedbush Securities.

"Nothing about the data was enough to alter the view that the US economy remains the strongest economy in the world and that US equities remain the best option among worldwide equity markets," he said.

Next week's calendar includes November car sales, the Federal Reserve's "Beige Book" of economic conditions and the November jobs report from the Department of Labour.

AFP