Stocks make solid gains, led by rise in energy sector
Stocks posted solid gains Tuesday, led by gains in energy companies after news reports said Saudi Arabia and Russia were working toward an agreement to cut oil production. Investors also worked through the initial batch of earning reports from the first quarter of the year.
The Dow Jones industrial average rose 164.84 points, or 0.9%, to 17,721.25. The Standard & Poor’s 500 index climbed 19.73 points, or 1%, to 2,061.72 and the Nasdaq composite increased 38.69 points, or 0.8%, to 4,872.09.
Corporate earnings got underway on a weak note after Alcoa, the aluminum giant, reported a 15% decline in revenue late Monday. Alcoa also had a huge drop in first-quarter profit from a year earlier as aluminum prices fell. Alcoa’s stock fell 2.7% to $9.48.
Later this week big U.S. banks including JPMorgan Chase, Citigroup and Wells Fargo will start releasing their results. Investors will be watching the banks to see how well they’ve weathered the market’s recent volatility and low oil prices earlier this year. Banks are often seen as a proxy for how the U.S. economy is doing.
“It’s not going to be a clean earnings season for financials at all,” said Peter Stournaras, a portfolio manager at BlackRock. “The banks have suffered from fears about oil loans, but those fears are overblown.”
Expectations for first-quarter earnings overall are low. Analysts surveyed by FactSet expect corporate profits to be down 9.1% from a year earlier, hurt primarily by the steep drop in the prices of oil and other commodities. The entire energy sector is expected to report a loss.
“Earnings will paint an important picture over the next few weeks, but the more important story is the continued improvement in the macroeconomic environment here in the U.S. and globally,” said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management in Chicago.
Juniper Networks shares fell 7.4% to $23.06 after the Sunnyvale, Calif.-based maker of computer network equipment cut its quarterly projections because of weaker demand from some businesses and project delays from telecommunications customers.
Horizon Pharma shares dived $26.3% to $13.42. The Irish drugmaker backed its guidance, but investors were disappointed with its projections for the early part of the year.
Oil prices moved sharply higher after Russian officials told Interfax, the Russian news agency, that they planned to reach a deal with Saudi Arabia to cut oil production. OPEC ministers are to meet Sunday in Qatar, though Russia is not an OPEC member.
Benchmark U.S. crude oil climbed $1.81, or 4.5%, to $42.17 a barrel in New York. Brent crude, the international standard, rose $1.86 to $44.69 a barrel in London.
Energy stocks, which have been beaten down in recent months, followed crude oil higher. The energy component of the S&P 500 jumped almost 3%.
U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 1.77% from 1.73% late Monday. The euro fell to $1.1397 from $1.1412 and the dollar rose to 108.53 yen from 107.94 yen.
In other energy commodities, heating oil rose 6 cents to $1.276 a gallon, wholesale gasoline rose 3 cents to $1.534 a gallon and natural gas rose 9 cents to $2.004 per 1,000 cubic feet.
Precious and industrial metals prices closed broadly higher. Gold rose $2.90 to $1,260.90 an ounce, silver rose 25 cents to $16.22 an ounce and copper went up six cents to $2.15 a pound.
