U.S. equities rose again on Monday, continuing the post-election “Trumphoria” rally. Investor sentiment was bolstered by an over-the-weekend agreement between OPEC and non-OPEC oil producers (mainly Russia and Mexico) to limit output in an effort to bolster prices. This lifted crude oil and energy stocks.
But some apprehension is perhaps creeping in, with most of the major averages moving lower ahead of an expected interest rate hike from the Federal Reserve on Wednesday.
In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 dropped 0.1%, the Nasdaq Composite lost 0.6% and the Russell 2000 ended the day 1.1% lower, snapping a six-day winning streak. Treasury bonds were mixed, the dollar was down, gold gained 0.3% and oil jumped 2.6% amid the first non-OPEC/OPEC agreement since 2001 and the largest ever cut by non-OPEC nations.
Officials agreed that non-OPEC producers would cut output by 558,000 barrels per day, adding to the 1.2 million barrel per day OPEC production cut agreed to earlier in the month. An executive director at the International Energy Agency said the move could raise oil prices to $60 a barrel or more. Russia’s energy minister said the agreement shows that OPEC and non-OPEC countries are in for long-term coordination of supply, speeding up oil market stabilization and reducing price volatility.
Moreover, Saudi officials hinted over the weekend that they could be willing to cut production below the psychologically significant 10-million-barrels-per-day level depending on market conditions — fueling chatter that Riyadh is looking to push oil prices to $70 and beyond. The big wild card is how quickly U.S. shale production ramps up in response to higher prices.
Energy stocks were boosted to a 0.7% gain with Exxon Mobil Corporation (NYSE:XOM) rising up and out of a six-month trading range. That was great news for Edge Pro subscribers who are enjoying a 152% gain in their Dec $88 XOM calls and a 130% gain in their $87.50 calls.
Overall, telecoms and utilities led the way with gains of 1%+ thanks to the easing of long-term yields. Chipotle Mexican Grill, Inc. (NYSE:CMG) climbed 3.8% amid a management shakeup as the company’s post-E.coli turnaround continues. Advanced Micro Devices, Inc. (NASDAQ:AMD) gained 3.3% thanks to an upgrade by analysts at BMO Capital Markets as investors grow optimistic for the launch of the new Zen CPU.
On the downside, financials cooled their heels with a 0.9% loss. Lockheed Martin Corporation (NYSE:LMT) fell 2.5% after president-elect Trump tweeted that the “F-35 program and cost is out of control” leading to worries of a clampdown on federal purchases.
After the close, Boeing Co (NYSE:BA) gained 1.6% after announcing a cut to 777 production, a 30% dividend increase and the renewal of a $14 billion share buyback authorization.
Looking ahead, the Fed will kick off its two-day policy meeting on Tuesday. Currently, according to the futures market, traders give 95%-plus odds of a 0.25% rate hike.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
