US: Stocks rise; energy shares rally with crude

[NEW YORK] US stocks rose on Monday, with the Standard & Poor's 500 index extending gains in the final 30 minutes of trading, as energy shares rallied after the price of crude oil advanced to a one-month high.

The S&P 500 rose 1.3 per cent to 2,020.85 at 4 pm in New York. Buying accelerated after the gauge climbed above its average price for the past 100 days as oil extended gains. Earlier, the index fell to its lowest level since Dec 17. The Dow Jones industrial average added 196.09 points, or 1.1 per cent, to 17,361.04. About 7.6 billion shares changed hands on US exchanges on Monday, 12 per cent more than the three-month average.

"The price of oil went up, boosting oil and energy stocks, which contributed to the market gain this afternoon and pulled up other sectors too," Walter "Bucky" Hellwig, who helps manage US$17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a phone interview. "If you had to lay the strength at the feet of one item, it's the fact that oil prices didn't collapse, and in fact moved higher." Oil rose to a one-month high on speculation that some investors bought contracts to close out bearish bets amid a falling rig count. Gasoline climbed as a refinery strike entered a second day. Crude has fallen more than 50 per cent since a June high due to a global supply glut.

Energy shares in the S&P 500 led gains, surging 3 percent for the biggest advance in two weeks. Exxon Mobil and Chevron jumped at least 2.5 per cent. Phone shares added 2.4 per cent as a group, with Verizon Communications climbing 2.8 per cent, the most since Feb 20, 2014.

The S&P 500 fell 2.8 percent last week, extending the worst monthly loss in a year. Weaker-than-forecast economic growth outweighed a rally in energy shares and the highest consumer confidence reading in 11 years. Continuing concern in Europe over the new Greek government's challenge to an austerity program also played a role. The index lost 3.1 per cent for the month, the worst performance since January 2014.

Data on Monday showed factories expanded in January at the weakest pace in a year as orders cooled, a sign weakness in overseas markets is restraining US manufacturing. The Institute for Supply Management's index dropped to 53.5 from 55.1 in December, the report from the Tempe, Arizona-based group showed on Monday. The median forecast in a Bloomberg survey of 74 economists called for a decline to 54.5. Readings greater than 50 signal growth.

The plunge in oil prices is limiting sales at manufacturers such as Caterpillar while slower growth from Europe to China and the strengthening dollar represent another hurdle for US exports.

A report on Monday showed consumer spending fell in December as households took a breather from the break-neck pace of buying in the fourth quarter.

Data last week showed the US economy expanded at a slower pace than forecast in the fourth quarter. Cooling business investment, a slump in government outlays and a widening trade gap took some of the luster off the biggest gain in consumer spending in almost nine years.

The Federal Reserve upgraded its assessment of the US economy in a Jan. 28 statement, and noted labor market conditions have improved further, "with strong job gains and a lower unemployment rate." That view suggests the Fed remains on track for a mid-year interest rate hike, and Friday's January nonfarm payrolls report may further solidify that view. Economists forecast 232,000 jobs were added last month, compared with 252,000 in December.

Nine S&P 500 members reported financial results on Monday. About 78 per cent of the companies that posted earnings this season have beaten analyst estimates, while 55 percent have topped sales projections, data compiled by Bloomberg show.

"The bottom line is it all comes down to company earnings and growth is on the positive side," Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management, said by phone. Voya oversees US$215 billion. "There are a lot of worries out there and the market gets a bit wobbly, but earnings guide the way." All of the 10 main industries in the S&P 500 advanced at least 0.4 per cent, while all but one of the 30 stocks in the Dow average advanced. Financial and industrial shares in the broader gauge jumped more than 1.5 per cent.

Exxon Mobil advanced after reporting a steep drop in fourth-quarter profit on lower prices and declining production as the rout in oil ushered in an era of frugality for an industry that reaped US$3.2 trillion in sales last year.

Denbury Resources added 12 per cent for the biggest gain in the S&P 500, while Chesapeake Energy climbed 7 per cent.

First Solar and SunEdison jumped at least 6.7 per cent. President Barack Obama's 2016 budget calls for continued tax breaks for wind and solar energy.