Investor sentiment gained strength as higher crude prices lifted the markets after three consecutive days of losses. Investors also negated weak economic reports amidst thin volumes and over 60% of the shares that are traded on the NYSE and Nasdaq closed in the green.
The Dow Jones Industrial Average (DJIA) gained 0.3% to finish at 12,394.66. The Standard & Poor 500 (S&P 500) was also up 0.3% and closed at 1,320.47. The Nasdaq Composite Index ended the day at 2,761.38, after gaining 0.6%. The fear-gauge CBOE Volatility Index (VIX) dropped below 17. On the New York Stock Exchange (NYSE), AMEX and Nasdaq, consolidated volumes remained light at 6.69 billion shares compared with last year’s daily average of 8.47 billion. On the NYSE, for every couple of stocks that rose, one stock was on the declining side.
Markets ended in the green for the first time since last Thursday, when LINKEDIN CORPORATION (NYSE:LNKD) made its debut on the Wall Street with its price more than doubling than the initial public offering price of $45 per share. LINKEDIN provided the necessary cushion to the markets and restored faith among investors, who would have otherwise been bogged down by a host of worrying economic reports. On Wednesday, it was only higher crude prices that pulled the markets out of their losing streak and helped investors ignore disappointing economic data.
Crude prices soared almost 2% to hit a two-week high amidst reports of an unexpected decline in US distillate inventories and a stabilization of gasoline supplies. The U.S. Energy Information Administration (EIA) reported: “Distillate fuel inventories decreased by 2.0 million barrels last week and are in the upper limit of the average range for this time of year.” The EIA also said: “Total motor gasoline inventories increased by 3.8 million barrels last week and are in the lower limit of the average range”. In addition, “U.S. crude oil imports averaged 9.2 million barrels per day last week, up by 662 thousand barrels per day from the previous week,” and “Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.4 million barrels per day”.
Following the report, U.S. light, sweet crude for June delivery was up $1.73 to $101.32 per barrel. Also helping the uptrend was the optimistic outlook for the second quarter from Halliburton Company (NYSE:HAL). Shares of Halliburton soared 5.0% to finally settle at $49.87. These developments boosted the broader markets and energy indices like the Philadelphia Oil Service Index, NYSE Arca Natural Gas Index and NYSE Arca Oil Index, which jumped 2.8%, 1.5% and 0.9%, respectively. Among the energy shares, Valero Energy Corp. (NYSE:VLO), Baker Hughes Incorporated (NYSE:BHI), Helmerich & Payne Inc. (NYSE:HP), National Oilwell Varco, Inc. (NYSE:NOV), Denbury Resources Inc. (NYSE:DNR) and Cabot Oil & Gas Corporation (NYSE:COG) surged 1.6%, 5.0%, 2.6%, 5.7%, 4.4% and 7.1%, respectively.
Meanwhile, The Commerce Department reported durable goods orders had suffered their largest decline in six months last month. The U.S. Census Bureau announced: “New orders for manufactured durable goods in April decreased $7.1 billion or 3.6 percent to $189.9 billion,” and added, “This decrease, down two of the last three months, followed a 4.4 percent March increase. Excluding transportation, new orders decreased 1.5 percent. Excluding defense, new orders decreased 3.6 percent”. The report provided no positives about the economy and bookings of transport equipment also declined. New orders for transportation equipment suffered the largest decrease as it sank $4.9 billion or 9.5 percent to $46.7 billion. Shipments of both manufactured durable goods and transportation equipment also fell heavily and the report stated: “Shipments of manufactured durable goods in April, down following four consecutive monthly increases, decreased $2.0 billion or 1.0 percent to $194.9 billion. This followed a 3.1 percent March increase. Transportation equipment, also down following four consecutive monthly increases, had the largest decrease, $1.5 billion or 3.0 percent to $46.6 billion.”
Separately, the Mortgage Bankers Association reported that applications for US home mortgages had jumped last week for the fourth consecutive week. The mortgage activity index was up 1.1%.
On the international front, with the Greek government and its opposition failing to agree on the method of reducing the country’s debt, chances of Greece restructuring its debt heightened. Analysts opined that Greece, in its bid to restructure the debt, will either have to reduce the interest rates or increase interest payments. Also, as Japan recovers from the earthquake and tsunami, exports declined 12.5% in April according to the Japanese government. The natural disaster had forced many manufacturers to shut down their production units and even the demand-supply dynamic was jolted. Auto shipments in Japan suffered a heavy blow, plunging by 67%. This drop in Japan might have caused the drop in new orders of US durable goods.
BAKER-HUGHES (BHI): Free Stock Analysis Report
CABOT OIL & GAS (COG): Free Stock Analysis Report
DENBURY RES INC (DNR): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
HELMERICH&PAYNE (HP): Free Stock Analysis Report
NATL OILWELL VR (NOV): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis Report
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