Stocks Advance as Oil Prices Top $71
Stocks continued to rise Wednesday, after major indexes hit new highs for the year Tuesday, as oil prices topped $71 a barrel and industrial production rose for a second straight month.
All three major indexes — the Dow Jones Industrial Average , the S&P 500 and the Nasdaq — were up about half a percent. The S&P hit a new high for the year shortly after the open, and is now up 56 percent from the March 9 low.
European stocks were up again, with the FTSEurofirst 300 index hitting 1,000 for the first time since October last year, while Asian stocks closed mixed.
Industrial production rose 0.8 percent in August, better than expcted, and the prior month was revised to a 1 percent gain — double the 0.5 percent originally reported. The increase was led by automakers, which ramped up production to meet "Clunkers" demand.
Analysts were encouraged by the fact that it was the second straight gain but were skeptical that the pace would hold after the "Clunkers" glow wears off.
"[W]e believe that the recovery process will be subdued and uneven as the household sector continues to struggle with ravaged balance sheets and lingering labor market weakness," Joshua Shapiro, chief U.S. economist at MFR Inc., wrote in a note to clients.
"It is interesting to note that minutes before today’s industrial production report, Ford was on the tape saying that September automotive sales had started off 'soft,' and that it is uncertain whether the economy is really on the mend," Shapiro said.
The U.S. market was little fazed by consumer-price data for August, particularly when excluding gasoline prices.
Though prices at the pump jumped 9.1 percent in August, core CPI was a tepid 0.1 percent, in line with expectations and indicative that the economy has little to worry about — at least in terms of inflation.
Kicking off the day, mortgage applications declinedlast week, perhaps due to a slight uptick in interest rates or the Labor Day holiday. Still, the pace of applications remains at one of the highest levels since June.
The price of crude oil rebounded above $71 a barrel after the EIA reported that crude supplies fell by 4.729 million barrels last week, more than double of what was expected.
Crude had fallen earlier after another major oil discovery was announced this morning.
Anadarko Petroleum said it had made a major oil discovery off Sierra Leone. The discovery came from a consortium of companies led by the Houston-based Anadarko.
Anadarko shares jumped more than 5 percent, while rival energy exploration companies also rose, including Chesapeake and XTO.
In corporate news, Lehman Brothers said Barclays Capitalgot a $8.2 billion "windfall profit"from excess assets it took control of when it bought some of the investment bank's units last year when Lehman went bankrupt.
But Barclays says the statement, made in filings to a court, was an "opportunistic claim."
Citigroup shares bounced back after sliding nearly 9 percent on Tuesday following news that the government may withdraw some of its 34-percent stake in the firm and that Citi might launch a $5 billion secondary offering.
Other banks also rallied after weakness on Tuesday, including Bank of America and JPMorgan. Some of the sector's biggest gainers today were SunTrust, HBC and Regions Financial.
Merger and acquisition activity continues to pick up.
Adobe Systemsannounced late Tuesday that itis buying software firm Omniturein a deal valued at $1.8 billion. The news came with Adobe's earnings report, which beat expectations.
And Bristol-Myers Squibb said it will sell Asia rights to over-the-counter drugs, as well as its Indonesian unit, to Japan's Taisho Pharmaceutical for $310 million. The moved marked Bristol's seventh deal in an effort to focus on prescription drugs.
Shares of Dow component Verizon skidded after UBS downgraded the company to "neutral" from "buy." The telecom faces general pressures on the wireless business, UBS said.
Genworth Financial priced an offering of 48 million shares at $11.75 each, and said 7.2 million more shares would be available to underwriters if there is strong demand. The move sent the insurer's shares up 2.4 percent premarket. The company's shares have been on a meteoric rise since the market's March cratering, when they traded as low as 78 cents.
And Warren Buffett told CNBC he has no regrets about any of the decisions he made one year ago in September when the financial crisis was at its worst.
Buffett said he "looked hard" at an offer that Friday night to buy AIG's property casualty operation in the range of $20 billion to $25 billion, but decided against it.
Still to come:
WEDNESDAY: Weekly crude inventories; Earnings from Oracle after the bell
THURSDAY: Housing starts; weekly jobless claims; Philly Fed; Earnings from FedEx
FRIDAY: Quadruple witching
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