Wall Street Flirts with 17K as Oil Prices Jump

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U.S. equity markets flirted with the 17000 mark on Wednesday, managing to end right on the threshold, as oil prices rallied and the bull market celebrated its seventh birthday.

The Dow Jones Industrial Average was up 36 points, or 0.21% to 17000. The S&P 500 gained 10 points, or 0.51% to 1989, while the Nasdaq Composite gained 25 points, or 0.55% to 4674.

Nine of ten S&P 500 sectors were in positive territory as energy led the way higher. Telecommunications lagged.

Today’s Markets

Stock markets took a cue from global crude prices, which swung higher after suffering steep losses of more than 3.5%, slipping below $40 a barrel in the prior session.

In recent action, West Texas Intermediate crude rallied 4.90% to $38.29 a barrel, while Brent, the international benchmark, gained 3.58% to $41.07 a barrel.

Part of what drove momentum in the oil patch was weekly oil inventories data from the Energy Information Administration. Data showed crude oil stockpiles rose by 3.9 million barrels to 521.86 million last week. That compared to forecasts for a 3.9 million-barrel build. Inventories at Cushing, Okla. Were up 690,000 barrels during the time period.

The data confirmed what Tuesday night figures from the American Petroleum Institute showed. Those figures saw a build for the third-straight week as stockpiles rose by 4.4 million barrels, more than the 3.9 million-barrel estimate. However, the reading was down from a 9.9-million barrel build the week prior.

Elsewhere in commodities, metals were mostly flat as traders moved into riskier assets. Gold prices declined 0.60% to $1,255 a troy ounce, while silver slipped 0.03% to $15.39 an ounce. Copper, meanwhile, gained 0.59% to $2.24 a pound.

In keeping with that theme, the yield on the benchmark U.S. Treasury bond rose 0.042 percentage point to 1.876%. Yields move in the opposite direction of prices.

Global central bank action was back at the forefront as investors across the world kept a close eye on the European Central Bank, which is expected to meet on Thursday and give an update on its economic outlook and monetary policy action.

Negative rate policy has been enacted in several nations across the world including the eurozone, Japan, Sweden, Denmark, and Switzerland. Thursday, investors largely expect to see the ECB slash its deposit rate, currently at -0.3%, by another 0.1% to 0.15%.

David Joy, chief market strategist at Ameriprise, said he expects to see some combination of policy moves that will send rates further into negative territory.

“They’ll announce maybe an increase in the size of QE or expansion of the bonds they buy, but I suspect that will be the extent of it. Beyond that, I’m not so sure there’s much more they can do,” he said.

He went on to say market reaction will be telling in the post-announcement period both in European and U.S. markets.

“If the market rallies, I would think it would be a strong consideration to lighten up [portfolio] exposure to the eurozone because growth won’t be robust enough,” he said.

The economic calendar in the U.S. continued to be light Wednesday with no significant releases scheduled. Thursday, investors will get the latest read on weekly jobless claims and the federal budget, and import and export prices were on deck for Friday.

In corporate news, Chipotle (NYSE:CMG) shares dropped 4.5% in recent action after the company shut a Massachusetts restaurant just outside of Boston for cleaning after four employees became sick. Chipotle, trying to recover from a series of food-borne illnesses that sickened about 50 people across 14 states, and included two norovirus outbreaks, said no customer illnesses have yet been connected to the Tuesday closure of the Massachusetts store.