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While you were sleeping: Energy stocks lead Wall St rally

Thursday 31st May 2018

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Wall Street rallied as a rebound in oil prices lifted energy stocks, while easing concern about Italy’s political turmoil also added to sentiment.

In 2.33pm trading in New York, the Dow Jones Industrial Average climbed 1.4 percent, while the Nasdaq Composite Index rose 1 percent. In 2.18pm trading, the Standard & Poor’s 500 Index gained 1.3 percent.

The Dow rose, led by rallies in shares of Exxon Mobil and those of Chevron, recently up 3.9 percent and 3.4 percent respectively, as energy stocks gained with the price of oil. 

The only two Dow stocks to trade lower were those of General Electric and Apple, recently down 0.5 percent and 0.2 percent respectively.

US Treasuries dropped, lifting yields on the 10-year note seven basis points to 2.85 percent.

The latest US economic data were mixed. In its Beige Book, the Federal Reserve noted that manufacturing “shifted into a higher gear,” though also pointed to “soft” consumer spending. 

"Economic activity expanded moderately in late April and early May with few shifts in the pattern of growth," according to the Fed's Beige Book. "The Dallas District was an exception, where overall economic activity sped up to a solid pace."

"Manufacturing shifted into higher gear with more than half of the Districts reporting a pickup in industrial activity and a third of the Districts classifying activity as 'strong'," the Fed noted. "By contrast, consumer spending was soft.”

The Fed also said there was “some concern about the uncertainty of international trade policy, though ”outlooks for near term growth were generally upbeat.”

The Beige Book underpinned bets the Fed will hike its key interest rate next month. It has flagged at least one other increase later this year. 

Meanwhile, a Commerce Department report showed gross domestic product grew at a 2.2 percent annual pace in the second quarter. That's down from a previous estimate for a 2.3 percent rate.

Separately, an ADP Research Institute report showed US private sector payrolls rose by 178,000 jobs in May, fewer than economists had expected.

“Job growth is strong, but slowing, as businesses are unable to fill a record number of open positions,” Mark Zandi, chief economist of Moody’s Analytics in West Chester, Pennsylvania, said, according to Bloomberg. Moody’s produces the figures with ADP. 

“Wage growth is accelerating in response, most notably for young, new entrants and those changing jobs,” Zandi noted. “Finding workers is increasingly becoming businesses number one problem.”

In Europe, the Stoxx 600 Index ended the day with a 0.3 percent advance from the previous close. Germany’s DAX Index rose 0.9 percent, while the UK’s FTSE 100 Index gained 0.8 percent.

France’s CAC 40 Index slipped 0.2 percent. 

Italian bonds rebounded, while the euro strengthened as investors reassessed the potential impact of political upheaval in Italy. Italy’s main stock index also recovered, paced by its banks.


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