OPEC took an important step toward a cap on crude-oil outputU.S. stocks swung higher on Wednesday, 28 September 2016 after OPEC took an important step toward a cap on crude-oil output.
The Dow Jones Industrial Average rose 110.94 points, or 0.6%, to finish at 18,339.24, aided by sharp gains by energy giants Exxon Mobil and Chevron Corp. The Nasdaq Composite Index climbed 12.84 points, or 0.2%, to end at 5,318.55. The S&P 500 index rose 11.44 points, or 0.5%, to close at 2,171.37, led by a 4.3% surge in the energy sector.
Equity indices began the day on a choppy note as volatility from the oil pit weighed on the broader market. Crude oil was in focus as a negative reading of the Department of Energy’s weekly inventory report weighed on the energy component. The energy component staged a reversal shortly after midday as reports showed that OPEC agreed to lower its production to 32.5 million barrels per day from approximately 33.2 million barrels. However, the reduction will not go into effect until OPEC meets on November 30.
The Organization of the Petroleum Exporting Countries reached an understanding to limit crude production and is considering cutting production to between 32.5 million to 33 million barrels a day. The potential production cut, along with a drawdown in U.S. crude supplies for a fourth week, sparked a strong rally in the crude oil market.
November West Texas Intermediate crude settled at $47.05 a barrel on the New York Mercantile Exchange.
Members of the Organization of the Petroleum Exporting Countries and other big oil producers held discussions on Wednesday on the sidelines of an energy forum in Algeria on ways to help stabilize the oil market. The market had its doubts that an output deal would be reached at the meeting as OPEC members Iran, Libya and Nigeria have all been trying to boost production, while Saudi Arabia, and non-OPEC Russia have been pumping oil at record or near-record rates.
The U.S. Energy Information Administration reported early on Wednesday that domestic crude supplies fell unexpectedly for a fourth week in a row. Crude inventories fell by 1.9 million barrels in the week ended Sept. 23. A 3.2 million-barrel climb was expected by market, while the American Petroleum Institute late Tuesday reported a decline of 752,000 barrels.
Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities. On Wednesday, the ICE U.S. Dollar Index edged up by 0.1%.
Today’s economic data at Wall Street included the weekly MBA Mortgage Index and the Durable Goods Orders report for August. The MBA Mortgage Index indicated that mortgage applications declined 0.7% in the week ending September 24. This followed a 7.3% decline in the prior week. Total durable goods orders were unchanged in August (consensus -1.9%), which was better than expected, while orders excluding transportation were down 0.4%, as expected. Total orders growth for July was revised down to 3.6% from 4.4% while growth in orders excluding transportation was also revised down to 1.1% from 1.5%.
Bullion prices ended lower at Comex on Wednesday, 28 September 2016. Gold futures settled lower on Wednesday for a second straight session as traders focused on Federal Reserve Chairwoman Janet Yellen’s testimony at a House hearing and upcoming comments this week from other speakers at the central bank.
December gold fell $6.70, or 0.5%, to settle at $1,323.70 an ounce, holding ground at its lowest levels in just over a week. Silver for December delivery shed 4.4 cents, or 0.2%, to $19.121 an ounce.
The heavily-weighted financial sector finished behind the broader market as participants responded to commentary from Federal Reserve Chair Janet Yellen.
Yellen didn’t say much about monetary policy during her testimony before the House Financial Services Committee, but several Fed officials were slated to make remarks this week, which could have implications for currency and stock market trading and influence demand for precious metals. On Tuesday, San Francisco Fed President John Williams told Reuters that he would support an increase-rate increase and that the central bank can raise rates without threatening the U.S. economy.
Treasuries ended on a lower note with yields rising through the curve. The yield on the 10-yr note finished higher by one basis point at 1.57%.
Today’s participation was above the recent average as more than 903 million shares changed hands on the NYSE floor.
Tomorrow’s economic data will include the third estimate of second quarter GDP (consensus 1.3%), the third estimate for the second quarter GDP deflator (consensus 2.3%), weekly initial claims (consensus 259k), and International Trade in Goods for August, which will each cross the wires at 8:30 ET. Separately, Pending Home Sales for August (consensus 1.0%) will be released at 10:00 ET.