U.S. stocks recovered from early losses on Monday to close higher, helped by firmer oil prices, as investors awaited an expected Federal Reserve interest rate hike later in the week.
The S&P 500 benchmark index rallied in the afternoon after falling earlier in the session in a volatile trading day. Concerns about high-yield bonds, oil price swings and the Fed made for a skittish market, said Peter Costa, president of Empire Executions Inc.
“It’s a lot of uncertainty,” he said.
While investors widely expect the Fed to announce its first rate hike in nearly a decade on Wednesday, they are also waiting for commentary from policymakers about what will happen next.
Traders see an 83-percent chance that the Fed will lift rates by 25 basis points, according to the CME Group’s FedWatch program.
The Dow Jones industrial average .DJI rose 103.29 points, or 0.6 percent, to 17,368.5, the S&P 500 .SPX gained 9.57 points, or 0.48 percent, to 2,021.94 and the Nasdaq Composite.IXIC added 18.76 points, or 0.38 percent, to 4,952.23.
The S&P energy sector .SPNY was up 0.8 percent. U.S. crude oil settled up 1.9 percent after moving within a hair of 11-year lows, but analysts and traders said it is still too early to declare the market reached bottom.
Although stocks closed higher, equity investors are still concerned about the high-yield bond market. Third Avenue Management LLC’s junk bond fund collapsed last week and the company said Monday its chief executive agreed to leave.
“It’s just the fear of the unknown,” said Angel Mata, managing director of listed equity trading, Stifel Capital Markets in Baltimore. “2008 – though it was seven years ago – is still fresh in everybody’s mind and the fear is we could have a kind of situation that we had back then, which was driven by the fixed-income side.”
Nine of the 10 major S&P sectors ended the day higher.
S&P materials .SPLRCM were the only sector to show losses, down 1.4 percent, hurt by Dow Chemical and DuPont, which agreed on Friday to merge. DuPont shares (DD.N) were down 3.6 percent, while Dow Chemical (DOW.N) fell 3.9 percent.
Newell Rubbermaid (NWL.N) was down 6.9 percent at $42.15. Newell, known for its food containers, agreed to buy Sunbeam and Coleman products maker Jarden Corp (JAH.N) for more than $15 billion. Jarden was up 2.7 percent at $54.09.
NYSE declining issues outnumbered advancing ones 2,326 to 810, for a 2.87-to-1 ratio on the downside; on the Nasdaq, 1,804 issues fell and 1,034 advanced, for a 1.74-to-1 ratio favoring decliners.
The S&P 500 posted 2 new 52-week highs and 54 new lows; the Nasdaq recorded 18 new highs and 236 new lows.
About 8.9 billion shares changed hands on U.S. exchanges on Monday, above the 7.03 billion average for the last 20 sessions, according to Thomson Reuters data.
Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints
Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.
Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.
Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.
China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
Unlocking Investments into Africa’s Renewable Energy Market
The African Energy Guarantee Facility (AEGF) is launching a virtual roadshow of free webinars allowing a deeper understanding of risk issues for renewable energy projects on the continent, and conversations around risk mitigation solutions. The first webinar will take place on Thursday, 23 September from 14:30-16:00 hrs. EAT.
The session will be oriented on how to get more energy projects from the drawing board to the grid. While the energy demand in African economies is expected to nearly double by 2040, and although the potential for renewable energy is 1,000 times larger than the demand, only 2GW out of almost 180GW of this new renewable power were added on the African continent.
Clearly not good enough! To improve the situation within the next two decades, new solutions need to be implemented urgently. De-risking and promoting private sector investments will play a crucial part of it.
In this 90-min interactive session, AEGF partners: the European Investment Bank (EIB), KfW Development Bank, Munich Re and the African Trade Insurance Agency (ATI) will share their experience and provide valuable insights on how they were able to come together and design practical solutions for investors and financiers of green energy projects in Africa aligned with SDG7 objectives.
Across Africa, the complexity of renewable energy projects and their long tenors hold back crucial energy investment. Tailored to the specific needs and risk profiles of sustainable energy projects, AEGF will tackle the investment challenge by providing underwriting expertise and capacity tailored to market needs.
The AEGF will significantly boost private investment in sustainable energy projects, both expanding access to clean energy and contribute to achieving UN Sustainable Development Goals. The scheme supports new private sector investment in eligible renewable energy, energy efficiency and energy access projects in sub-Saharan Africa.
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