Oil prices extended a run above $40 per barrel, settling at their highest levels of 2016, and that was enough to push stocks higher Tuesday. Aided by leadership from the energy patch and financial services names, the S&P 500 gained 0.97% while the Dow Jones Industrial Average added 0.94%. The Nasdaq Composite rose 0.8%.
Oil got a lift from news that Russia and Saudi Arabia are close to an agreement to freeze output. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries (OPEC) and Russia is the biggest non-OPEC producer.
It is oil’s rise that explains why Chesapeake Energy Corporation (NYSE:CHK) and Marathon Oil Corporation (NYSE:MRO) are two of today’s best stocks while analyst chatter helped Yandex NV (NASDAQ:YNDX) join that group.
Chesapeake Energy Corporation (CHK)
Rising oil prices helped, but there were some other catalysts behind Tuesday’s gain of 34.4% on more than triple the average daily volume for Chesapeake Energy, the second-largest U.S. natural gas producer.
After soaring almost 20% on Monday, CHK surged again Tuesday as investors embraced news that the Oklahoma-based company is maintaining a credit limit of $4 billion.
Analysts liked the CHK news as well. Tudor, Pickering, Holt upgraded the stock to “hold” from “sell.”
Citigroup chimed in with its own upgrade on CHK, raising its rating on the company’s debt to “marketweight” from “underweight.”
“The credit facility amendment also loosened covenants and put a hold on redeterminations, giving CHK time to ride out a low commodity price environment. Given restrictions in the 2nd lien covenants, we would expect CHK to issue a secured first lien term loan which it could use to take-out the 2017-2018 bonds,” according to part of a Citi note posted by CNBC.
Marathon Oil Corporation (MRO)
Oil’s ascent also helped boost shares of Marathon Oil, but as is the case with CHK, there are other reasons behind MRO’s jump today. Shares of MRO climbed 12.4% after the company said Monday it will sell almost $1 billion in assets, bringing its asset sales to $1.3 billion since August.
MRO “said it will divest all of its Wyoming upstream and midstream assets for $870 million, excluding closing adjustments,” reports CNBC. MRO did not identify the buyers of the Wyoming assets.
MRO also said it is selling a 10% non-operating stake in a Gulf of Mexico discovery, some Piceance Basin assets and some unused acreage in West Texas.
Shares of MRO are up 4% this year.
Shares of Yandex, the largest provider of internet search services in Russia, soared 6.9% on heavy volume after Goldman Sachs upgraded the stock. Goldman upgraded YNDX to “buy” while boosting its price target on the stock to $19.90 from $15.50.
“Our 12-month price target increases to US$19.90 (from US$15.50), driven by an average 7% increase to our 2015-2018 estimated EPS estimates to reflect lower rental costs from the HQ office acquisition, and a stronger Ruble/U.S. dollar assumption (65 vs. 77). We continue to value the company at a 25x 2017 [estimated earnings] P/E multiple,” Goldman said of YNDX in part of a note posted by Barron’s.
At the time of this writing, Todd Shriber did not own any of the aforementioned securities.
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