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Stocks enjoy a broad rally as oil prices jump

May 16, 2016

A jump in oil prices and some deal news helped send stocks up broadly Monday, breaking a three-day losing streak. 

Investors bought from the start of trading, pushing oil drillers and other energy stocks up sharply. A bullish oil report from Goldman Sachs helped send benchmark U.S. crude up 3.3% to its highest close in six months. All 10 sectors of the Standard and Poor’s 500 index rose. 

Major indexes were also boosted by news that billionaire Warren Buffett had invested in Apple, triggering a 3.7% jump in that stock. Apple is the most heavily weighted member of the S&P 500, so a rise in its stock has an outsize effect on the index. 

The S&P 500 rose 20.05 points, or 1%, to 2,066.66. The Dow Jones industrial average rose 175.39 points, or 1%, to 17,710.71. The Nasdaq composite index climbed 57.78 points, or 1.2%, to 4,775.46. 

The report from Goldman argued that the glut in oil supplies has turned into a “deficit,” so prices could continue to rise. The sunny forecast, plus oil production troubles in Nigeria, pushed U.S. crude up $1.51 to $47.72 a barrel. A plunge in oil prices since mid-2014 has hammered energy company earnings, one reason overall S&P 500 earnings have not risen since that year. 

When oil prices climb, investors think the “earnings drought is at an end,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors. “Whatever happens to energy drives all the markets.” 

Energy shares in the S&P 500 rose 1.6% on Monday. Marathon Oil jumped 4% and Devon Energy also rose 4%. 

In deal news, Tribune Publishing soared 23%, to $14.08 after USA Today owner Gannett raised its offer to buy the publisher. The new offer comes one week after Tribune, which owns the Los Angeles Times, Chicago Tribune and other newspapers, adopted a “poison pill” plan to help it remain independent. Gannett shares rose 2.2% to $15.98. 

U.S. interest rate policy could affect stocks this week. In addition to planned remarks from several Federal Reserve officials, the Fed is scheduled Wednesday to release minutes of its last meeting. 

Investors will be looking for clues as to whether the central bank is likely to raise rates from low levels that have helped push up stocks and other assets since the financial crisis. A report released Friday showed that last month, retail sales rose a solid 3% from a year earlier, suggesting the Fed may be more likely to raise rates. 

Anna Rathbun, director of research for investment manager CBIZ Retirement Plan Services, said investors are jittery, notwithstanding Monday’s climb. 

If the Fed raised rates, “the question is, ‘What then?’” she said. “Will stocks and commodity prices fall again?” 

The central bank’s next two-day policy meeting begins June 14. 

In other stocks making moves, Memorial Resource Development rose 3% to $13.86 after rival natural gas producer Range Resources said it would buy Memorial for $3.3 billion. Range Resources plunged 10% to $37.69. 

Anacor Pharmaceuticals rocketed 57% to $100.67 after drug giant Pfizer announced a deal to buy the maker of a topical eczema treatment for $5.2 billion. Pfizer rose 0.6% to $33.38. 

Warren Buffett’s Berkshire Hathaway bought 9.8 million Apple shares in the first quarter, a stake worth nearly $1 billion, as the tech giant traded near its lowest price in almost two years, according to regulatory documents released Monday. Apple shares rose 3.7% to $93.88. 

In overseas markets, Britain’s FTSE 100 inched up 0.2% and the CAC-40 in France slipped 0.2%. Trading in Germany was closed for a holiday. 

In other energy markets, Brent crude, used to price international oils, rose $1.14, or 2.4%, to $48.97 a barrel in London. In New York, wholesale gasoline rose 2 cents to $1.61 a gallon, heating oil rose 4 cents to $1.44 a gallon and natural gas fell 7 cents to $2.03 per 1,000 cubic feet. 

Precious and industrial metals prices closed higher. Gold rose $1.50 to $1,274.20 an ounce, silver rose 2 cents to $17.15 an ounce and copper rose 2 cents to $2.09 a pound. 

U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 1.76% from 1.70%. The dollar rose to 108.98 yen from 108.63 yen and the euro rose to $1.1320 from $1.1307. 


UPDATES:

3:23 p.m.: This article was updated with closing prices and additional information. 

7:54 a.m.: This article was updated with more recent prices and additional information. 

This article was originally published at 7:05 a.m.

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