S&P500 Stocks Working Its Way Out of Correction Territory as Oil Spikes
New York (Feb 17) Stocks rose Wednesday and were on track for their first three-day winning streak of the year as hopes Iran would agree to a production cap boosted crude oil.
The S&P 500 added 1.3%, cresting the line indicating a correction. The benchmark index is now down 10% from its 52-week high, the low-end range for a correction. The Dow Jones Industrial Average was up 1.2%, and the Nasdaq jumped 1.6%.
Crude oil extended gains after Iran's oil minister said he supported the Organization of Petroleum Exporting Countries' efforts to stabilize oil prices. Qatar's energy minister and head of OPEC met with Iranian and Iraqi leaders in Tehran to try to come to agreement on production levels in order to address the commodity crisis. Oil prices have recently fallen to new 13-year lows on record production levels, global oversupply, and signs of weaker demand. West Texas Intermediate crude oil added 3.8% to $30.27 a barrel.
Producer prices unexpectedly rose in January, up 0.1% compared to an expected 0.2% decline. Core prices, excluding volatile items such as food and energy, rose 0.2% and are up 0.8% over the past 12 months. The reading proves a positive for inflation which has been weighed down by a slump in commodity prices.
"The surge in the core personal consumption measure may indicate that some of the weakness in inflation could be starting to abate," said Rob Martin, U.S. economist at Barclays. "We continue to expect past appreciation of the dollar and the ongoing softness in commodity prices to weigh on price inflation throughout this year but this report suggests that ongoing strength in the domestic economy may offset some of these external pressures."
Industrial production in the U.S. climbed 0.9% in January, three times the increase analysts had expected. Sharper growth indicated fears over the health of the U.S. economy, particularly in manufacturing, may have been overblown.
Builders began construction on fewer number of homes than expected in January, a weak showing in what has been robust growth in the housing sector. U.S. housing starts fell 3.8% to a seasonally adjusted rate of 1.1 million, according to the Commerce Department. Economists had expected an annual rate of 1.17 million.
The Federal Reserve minutes from the central bank's Jan. 27 meeting will be released at 2 p.m. EST. Investors appear keen to analyze the release for hints the central bank could delay another interest rate hike until U.S. economic data improves and financial markets stabilize.
"This week's FOMC minutes are likely to reveal a confused Fed," Peter Cardillo, chief market economist at First Standard Financial, wrote in a note. "The outlook remains for a sub-moderate arc that could lead to a quarter or two of flat to negative economic activity. This scenario ensures a hand-off rate hike in March."
Fossil (FOSL - Get Report) shares jumped 14% after the accessories retailer beat analysts' estimates on its top- and bottom-lines. The company earned $1.46 a share, 16 cents above estimates. Revenue of $992.5 million came in above expectations, though fell just over 6% from a year earlier.
Kinder Morgan (KMI - Get Report) rose more than 5% after Warren Buffett's Berkshire Hathaway (BRK.A - Get Report) disclosed a new stake totaling 26.5 million shares. The new stake comes at a time of intense pressure for Kinder Morgan. Shares have fallen by nearly two-thirds in roughly 10 months as falling oil prices reduced profit.
Apple (AAPL - Get Report) shares were on watch after activist investor Carl Icahn reduced his stake in Apple by 7 million shares to 45.8 million shares, down 13% from Sept. 30, according to a filing with the Securities and Exchange Commission. David Einhorn's Greenlight Capital also reduced its Apple stake in the fourth quarter to 6.3 million Apple shares at the end of 2015, down 44% from Sept. 30.
Priceline (PCLN - Get Report) rose 10% after breezing past fourth-quarter expectations. The online travel company reported adjusted earnings of $12.63 a share, above estimates of $11.81 a share. Revenue reached $2 billion and surpassed forecasts of $1.96 billion.
T-Mobile US (TMUS) added more than 1% following a better-than-expected quarter. The telecom giant more than doubled quarterly profit to 34 cents a share, beating estimates. Revenue climbed 1.1% to $8.25 billion as the company added 2.1 million net customers during the period.