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Equities close higher, spurred by energy stocks and rising oil

Energy stocks and a sprint by oil prices helped US stocks rise on Monday and some traders started to call time on the 20-month fall in fuel costs

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Sunset for shale output?

Energy stocks and a sprint by oil prices helped US stocks rise on Monday and some traders started to call time on the 20-month fall in fuel costs.

The Dow Jones Industrial Average closed up 1.4% at 16,620, the broader S&P500 index was up 1.45% at 1,945, and the Nasdaq Composite was 1.47% higher at 4,570, with energy stocks dominating the top-10 risers skyline.

There were technical reasons partly to thank, with the West Texas Intermediate future contract deliverable in March expiring on Monday and rolling over to the April contract as the new front month.

But there were also news-driven factors at play. On Friday, Baker Hughes (NYSE:BHI) reported that the number of active US oil rigs fell by 26 to 413, marking the ninth successive week of declines.

On Monday, the International Energy Agency said in its medium-term oil outlook report that oil "supply and demand will gradually rebalance by 2017, with a corresponding recovery in oil prices from around $30 a barrel."

Causing a panic over shale, the IEA report forecast that US shale production will drop by 600,000 barrels a day this year.

That was enough to spur a spike in US oil futures. The March contract closed up 6.2% at $31.48.


Mid-Session

US energy stocks led Wall Street shares higher at midsession on Monday after speculation that US shale output is falling spurred a 8% spike in oil prices and a rally in equities.

Although too early to write off another drop in crude prices on Gulf oil supply expansion, some oil dealers seen it as at least arresting what has been a 20-month collapse in oil prices.

The Dow Jones Industrial Average was up 1.44% at 16,628, the broader S&P500 was up 1.28% at 1,942 and the Nasdaq gained 1.36% to 4,565.

The top riders on the oil news were Chesapeake Energy (NYSE:CHK), up 19% to $2.38 and Freeport-McMoRan (NYSE:FCX) up 13% at $7.79. In fact, only third-biggest riser, Alcoa (NYSE:AA), was the odd one out in the top nine risers in the S&P500 being energy stocks.

Meanwhile, Chevron (NYSE:CVX) led the Dow, with a 3.2% gain to $89.32.

The US benchmark, West Texas Intermediate, was up 8.1% at $32.05 a barrel.

 


Open

Following the lead of European markets, and encouraged by the resurgence of the oil price, US blue-chips opened sharply higher.

The US oil benchmark, West Texas Intermediate for March delivery, was up more than 7% after the Baker Hughes rig count reported a decline in oil rigs in use in the US for the ninth week in a row.

The S&P 500 and the Nasdaq Composite were both up 1.4% after 45 minutes of trading, with the former up 26 points at 1,944 and the latter up 61 points at 4,566. The Dow Jones was up 1.3%, or 210 points, at 16,602.

Not surprisingly, energy stocks such as Chesapeake Energy (NYSE:CHK) and CONSOL Energy (NYSE:CNX) were among the blue-chip leaders.

Mid-cap Kosmos Energy (NYSE:KOS) shot up 15.4% as the company declared an underlying net income of $17.6mln in the fourth quarter, which reduced the loss for the year to $65.6mln.

Flooring firm Lumber Liquidators (NYSE:LL) slumped more than 20% after the Centers for Disease Control and Prevention revealed that its previous assessment of the cancer risk posed by the retailer's flooring, which contains known carcinogen formaldehyde, had been on the low side.

Skin health company Photomedex (NASDAQ:PHMD), up 46%, was wanted after it unveiled plans to sell its consumer and professional business to DS Healthcare Group for around $48mln.  


Preview

Wall Street futures are pointing to be brighter start to the week with crude markets again providing the direction.

As US crude moves more than 4% higher, to $33.10, this morning traders in New York are looking to a positive session for equities.

Dow Jones futures are up some 177 an hour before the opening bell, at 16,531, while the S&P 500 and Nasdaq are also seen just over 1% higher.

In Europe, London’s FTSE100 made a bright start as investors shrugged off any concerns over Britain leaving the UK the European Union.

The blue chip index was 70 points higher at 6,022, as campaigning started in earnest for the referendum in four months time.

It comes after a deal was struck by Prime Minister David Cameron on Friday night, over reforms he had sought. Boris Johnson, London’s Mayor has already come out on the "no" side, though a raft of British businesses today backed the PM’s stay-put stance.

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