U.S. equities pushed higher again on Thursday thanks to further gains in energy prices and confirmation, from the Federal Reserve meeting minutes on Wednesday, that no rate hikes are likely at the September meeting (or the December meeting, for that matter).
In the end, the Russell 2000 gained 0.8% to lead the markets forward. The Dow Jones Industrial Average gained 0.1%, the S&P 500 improved by 0.2% and the Nasdaq Composite was 0.2% better. Treasury bonds were stronger on the day, the dollar was weaker, gold gained 0.6%, and oil extended its recent rally with another 2.8% gain.
Energy stocks led the way on the rise in oil, adding 1.8%. ConocoPhillips (NYSE:COP) gained 0.9% to push the Sep $43 calls recommended to Edge Pro subscribers to a near 30% gain since added on Tuesday. Utilities added 1.2% while materials were up 0.7%. Telecom and consumer discretionary were the laggards.
The recycling of those Russia-OPEC production freeze rumors from February has ignited a pretty strong short-covering rally in energy. It’s one that has taken prices up near early June highs near $50-a-barrel despite lingering supply and inventory concerns. This will also boost inflation, which could turn up the heat on the Federal Reserve to hike rates in December, as energy prices are now up on a year-over-year basis.
Wal-Mart Stores, Inc. (NYSE:WMT) gained 1.8% on an earnings beat driven by better sales, with comps up 1.6% vs. the 1% expected. This marked the eighth consecutive quarterly increase. Forward guidance was also strong, bolstering sentiment in what has been a difficult retail environment. The company’s online presence is doing well, up 11.8%, and is likely to keep growing given the recent acquisition of Jet.com.
The futures market isn’t pricing in a rate hike from the Fed until March 2017. Thus, stock investors seem to be rounding back and bidding up areas of the market that have lagged the post-Brexit surge out of the June lows. Some inflation hedging appears to be happening as well, with gold and silver perking up a little.
Areas of fresh interest include foreign/emerging-market stocks (benefiting from the recent weakness in the U.S. dollar) and transportation stocks. Airlines in particular are perking up as recent concerns about industry overcapacity and pinched profitability are giving way to optimism about a rebounding U.S. consumer.
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