Stocks close higher as oil jumps 3%, Dow up 89 points
U.S. stocks kicked off the new week with sharp gains as oil prices rallied and Wall Street readies for the start of the third--quarter earnings season and awaits more news from the Federal Reserve and watches politics in the homestretch to the presidential election.
The Dow Jones industrial average rose 88.55 points, or 0.5%, to 18,329.04. The Standard & Poor's 500 stock index was up 9.92, or 0.5%, to 2163.66 and the Nasdaq composite rose 36.27, or 0.7%, to 5328.67 and briefly traded above its record closing high.
A rally in the oil patch powered stocks, with U.S.-produced crude jumping 3% to $51.34 a barrel. Oil stocks rose with the Vanguard Energy ETF (VDE) up 1.7%.
All eyes on Wall Street are on corporate earnings this week, as the reporting season kicks off unofficially Tuesday with results from aluminum maker Alcoa and gains more import on Friday with reports from three major banks (Wells Fargo, Citigroup and JPMorgan Chase). The outlook for overall profits for the S&P 500 is not bright, as analysts are expecting earnings to contract 0.7% in the third quarter, which if it occurs would mark the fifth straight quarter of negative growth, according to earnings tracker Thomson Reuters I/B/E/S.
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The Federal Reserve and interest rates will also be a topic of discussion, following a solid but slight miss Friday on the September jobs report. The 156,000 new jobs created last month were below the 170,000 jobs analysts' had expected, but job creation was still strong enough to keep the nation's central bank on track for its first interest rate hike of the year later this year, with Wall Street placing odds of roughly 60% of a rate hike at the Fed's December meeting.
Wall Street will get more insight into the Fed's thinking this week on Wednesday from the release of the Fed's minutes of its September meeting, as well as a full slate of speeches on tap this week from Fed members, including a speech Friday from Fed chair Janet Yellen in Boston.
The U.S. bond market is closed for the Columbus Day holiday. (The 10-year Treasury closed at 1.722% Friday.) Stock markets in Japan, Hong Kong and Canada were also closed. The threat of rising interest rates has hurt so-called stocks that pay out sizable dividends, or so-called bond proxies, in recent weeks. The utilities sector in the S&P 500, for example, has fallen sharply the past few weeks, and telecom stocks and real estate shares have also suffered.
"We are now heading into earnings season and of course, this nightmarish election; pay attention," says Gary Kaltbaum, president of money-management firm Kaltbaum Capital Management.
Indeed, politics is also in focus, following the second presidential debate Sunday night between Hillary Clinton and Donald Trump. Markets will continue to monitor presidential polls to try to gauge which candidate has a better chance of capturing the White House.
"Traders are digesting last night's U.S. presidential debate, which many believe kept the odds in favor of Democratic nominee Hillary Clinton," Josh Selway of Schaeffer's Investment Research, said via e-mail.
In individual stock news, shares of Twitter (TWTR) fell 11% amid news reports that bidders might not materialize to purchase the troubled social media company. Shares of Mylan (MYL) rose more than 8% after the company settled ($465 million) with the U.S. government for overcharging for its EpiPen treatments.
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Investors continue to eye the British pound, which has been under pressure in the past week since Britain prime minister Theresa May said the UK would trigger talks to split from the European Union in the first quarter of 2017 and also stressed that immigration issues were more important than access to the EU's single market system. On Friday, the pound suffered a so-called "flash crash," tumbling more than 6% vs. the dollar in a matter of minutes, before rebounding and cutting its losses to roughly 2%. In early trading Monday, the pound was down another 0.4% vs. the dollar and at a 31-year low vs. the greenback.
Stocks were higher in the UK and Europe. London's FTSE 100 index, an index full of companies that support a lot of goods and therefore benefit from a weaker pound, rose 0.8%. Shares were 1.3% higher in Germany, up 1.1% in Paris and the broad Stoxx Europe 600 index was 0.7% higher.