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US: Wall Street opens higher as oil prices, defense stocks rise

Monday, May 22, 2017 - 22:42

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Wall Street gained in early trading on Monday, helped by higher oil prices and as defense stocks rose after a US$110 billion arms deal between the United States and Saudi Arabia.

Oil prices were up about 0.6 per cent, bolstered by confidence that top exporters will this week agree to extend supply curbs, with suggestions that the cuts could even be deepened.

President Donald Trump visited Saudi Arabia over the weekend, on his first foreign trip since taking office and one that the White House hopes will shift the focus away from domestic controversies such as his firing of a former FBI head last week and reports of his administration's links to Russia.

The central achievement of Mr Trump's visit was nearly US$110 billion in deals sealed on Saturday in which Riyadh will buy US arms to help it counter Iran, with options running as high as US$350 billion over 10 years.

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Shares of defense firms such as General Dynamics, Raytheon, Boeing and Lockheed Martin were up between 0.6 per cent and 2.2 per cent in early trading.

All the 11 S&P sectors were higher, led by the industrials index's 0.68 per cent rise. Boeing was giving the biggest boost to the Dow Jones Industrial Average.

"While the headlines of the Trump visit are overshadowing the geopolitical and domestic political concerns, oil prices are moving higher ... on Opec expectations," Peter Cardillo, chief market economist at First Standard Financial wrote in a note.

At 9.35am ET (1335 GMT) the Dow was up 76.07 points, or 0.37 per cent, at 20,880.91, the S&P 500 was up 7.98 points, or 0.33 per cent, at 2,389.71 and the Nasdaq Composite was up 25.32 points, or 0.42 per cent, at 6,109.02.

Wall Street ended lower last week on concerns about the political storm surrounding Mr Trump's presidency, with investors fretting if Mr Trump will be able to fulfill campaign promises for fiscal stimulus and tax reform.

Many investors saw the policy promises as a key reason for the rally in US stocks since his election win in November.

While the political developments in Washington continue to play on investors' minds, sentiment has been bolstered by the strong quarterly earnings season.

Corporate reports show that, overall, earnings for S&P 500 companies increased 15.1 per cent in the first quarter, their best showing since 2011, according to Thomson Reuters I/B/E/S.

Amgen fell 2.3 per cent to US$152.85 after the company and UCB SA said they no longer expect their experimental osteoporosis drug to win US approval this year.

Ford was up 1.7 per cent at US$11.05 after the automaker said it would replace its chief executive in response to investors' growing unease over its stock performance and prospects.

Advancing issues outnumbered decliners on the NYSE by 1,905 to 620. On the Nasdaq, 1,528 issues rose and 658 fell.

The S&P 500 index showed 13 new 52-week highs and one new low, while the Nasdaq recorded 37 new highs and seven new lows.

REUTERS

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