Stock Market News For August 04, 2016

Gains in energy and financial shares helped major indexes end in the green on Wednesday. Rebound in oil prices due to an unexpected drop in gasoline stockpiles boosted energy shares while better-than-expected rise in private sector jobs was a shot in the arm for financial stocks. Such an upbeat report strengthened the case for the Fed to hike rates this year. The Dow snapped seven straight sessions of losses to finish in positive territory, while both the S&P 500 and the Nasdaq lodged a moderate advance.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.

The Dow Jones Industrial Average (DJI) gained 0.2%, to close at 18,355.00. The S&P 500 rose 0.3% to close at 2,163.79. The tech-laden Nasdaq Composite Index closed at 5,159.74, increasing 0.4%. The fear-gauge CBOE Volatility Index (VIX) dropped 4.7% to settle at 12.75. A total of around 6.67 billion shares were traded on Wednesday, higher than the last 20-session average of 6.6 billion shares. Advancers outpaced declining stocks on the NYSE. For 66% stocks that advanced, 31% declined.

A surprisingly large draw on gasoline stockpiles helped oil prices make their biggest gains in three weeks on Wednesday. Gasoline inventories slumped by 3.3 million barrels, way more than the forecasted drop of 200,000 barrels, according to the Energy Information Administration (EIA). Larger-than-expected gasoline inventory offset a build in crude stockpiles.

Heading into August, oil had entered a bear market, but low prices also lured bargain buyers, leading to the periodic rebound. The WTI crude gained 3.2% to close at $40.83 a barrel, its largest gain since July 12. The Brent crude snapped a five-session losing streak to finish at $43.20 a barrel, up 3%.

Sharp rise in oil prices helped lift shares of energy companies. The Energy Select Sector SPDR (XLE (NYSE:XLE)) gained 1.9%, the highest among the S&P 500 sectors. Dow components Exxon Mobil Corporation (NYSE:XOM) (XOM) and Chevron Corporation (NYSE:CVX) (CVX) advanced 0.5% and 1%, respectively. Other key stocks from the sector such as Schlumberger Limited (SLB), Helmerich & Payne (NYSE:HP), Inc. (HP) and Williams Companies (NYSE:WMB), Inc. (WMB) increased 0.9%, 1.8% and 7.1%, respectively.

U.S. private employers added 179,000 jobs in July, above analysts’ expectations of around 170,000 jobs, according to the Automatic Data Processing, Inc. (ADP). Last month, services added 185,000 jobs, but goods producing sector lost 6,000 jobs. Private payroll gains in the month earlier were revised upwards to 176,000, which is 4,000 more than originally reported. The report came in ahead of the much anticipated nonfarm payroll report scheduled to be released on Friday.

Thanks to better-than-expected private jobs growth, financial stocks gained as this raised expectations of a rate hike later this year. Chicago Federal Reserve Bank President Charles Evans also said on Wednesday that one rate hike makes sense this year, despite, inflation remaining below the Fed’s desired target range. The Fed had abstained from raising rates last month, but said that near-term risks to the economic outlook have diminished. The Fed pointed out that the labor market has “strengthened” last month, while household spending is “growing strongly” as buyers are more willing to spend.

The Financial Services Select Sector SPDR (XLFS) went up 1.7% and was the second biggest gainer among the S&P 500 sectors. Dow components JPMorgan Chase & Co (NYSE:JPM) (JPM) and Goldman Sachs Group (NYSE:GS), Inc. (GS) increased 1.6% and 1.5%, respectively. Other key stocks including Morgan Stanley (NYSE:MS) (MS), Citigroup Inc (NYSE:C) (C) and Berkshire Hathaway Inc. (NYSE:BRKa) (BRK.B) increased 1.5%, 2.1% and 0.2%, respectively.

In economic news, the Institute for Supply Management reported that ISM Services Index decreased from 56.5% in June to 55.5% in July. The decline was more than the consensus estimate of a decrease to 56.1%. The reading showed that service sector activity in the U.S. grew at a slower pace than expected in July. Any reading above 50 generally shows expansion.

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

SCHLUMBERGER LT (SLB): Free Stock Analysis Report

HELMERICH&PAYNE (HP): Free Stock Analysis Report

WILLIAMS COS (WMB): Free Stock Analysis Report

AUTOMATIC DATA (ADP): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

GOLDMAN SACHS (GS): Free Stock Analysis Report

MORGAN STANLEY (MS): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report

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