As has been customary lately, the direction of the stock market yesterday was primarily dependent on oil prices. With prices jumping more than 3 percent, the biggest winners were stocks in the energy sector, with an average price increase of 3.1 percent.
On Wall Street, stock indices rose on Thursday, thanks to the increase in oil prices and better-than-expected business results from several companies, including Facebook.
The Dow Jones strengthened by 125 points, or 0.79 percent, to 16,069 points, while the S&P 500 rose 0.55 percent to 1,893 points, and the Nasdaq index increased by 0.86 percent to 4,506 points.
As has been customary lately, the direction of the stock market yesterday was primarily dependent on oil prices. With prices jumping more than 3 percent, the biggest winners were stocks in the energy sector, with an average price increase of 3.1 percent.
Thanks to investors’ hopes that OPEC, Russia and other major oil producers will cut production to narrow the gap between supply and demand, the price of a barrel in the London market jumped 2.4 percent yesterday to $33.89.
In the American market, however, the price of a barrel increased by 2.9 percent to $33.22, meaning that since the beginning of the week, oil prices have risen about 6.5 percent, indicating profits for the second consecutive week.
The positive sentiment among investors is also attributed to better-than-expected quarterly business results from several companies, primarily Facebook, whose stock price jumped more than 15 percent.
The S&P technology sector index rose by 1.5 percent, thanks in part to the rise in the stock price of Alphabet, Google’s parent company.
Solid business results from a number of companies and the rise in oil prices fuel hopes that sharp fluctuations in the stock market, caused by the slowdown in China’s economic growth and the drop in ‘black gold’ prices, are coming to an end. However, analysts urge caution.
“Some large companies have reported excellent results. I would like to say that the market will grow from now on, but I think it won’t be that easy,” says Chuck Carlson, director at Horizon Investment Services.
While the business results of some companies exceeded expectations, others fell short. Thus, due to weaker-than-expected financial results, the stock prices of Amazon and eBay plummeted more than 10 percent yesterday.
Considering the business reports released so far, analysts in a Reuters survey estimate that the earnings of companies in the S&P 500 index fell more than 4 percent in the fourth quarter of last year compared to the same period the previous year.
This means that an earnings recession is looming as low oil prices, a weakening Chinese economy, and a strong dollar are expected to lead to a decline in earnings for the second consecutive quarter.
Investors are cautious also because Fed leaders did not clearly indicate in this week’s meeting that key interest rates will remain unchanged for some time due to turmoil in financial markets since the beginning of the year.
They only stated that they are monitoring the situation globally and that the U.S. economy is on a path of moderate growth. This means, analysts interpret, that all options are open, including the possibility of further interest rate increases as early as March.
In European markets, however, stock prices fell yesterday. The London FTSE index weakened by 0.98 percent to 5,931 points, while the Frankfurt DAX slid 2.44 percent to 9,639 points, and the Paris CAC fell 1.33 percent to 4,322 points.
