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US stocks rebound as crude-oil rally spurs advance

Oct 05 2016 16:13
Camila Russo

Madrid - US stocks rose as a rally in crude oil boosted energy producers, overshadowing concerns that central banks could begin to tighten monetary policy.

The S&P 500 Index rose 0.3% to 2 157.02 at 15:33, after two days of losses following hawkish comments from Federal Reserve officials.

Equity markets have seen a revival of volatility after weeks of torpor, and the S&P 500 may be headed for more turbulence in October, a month that’s delivered the most swings of at least 1% for the S&P 500 Index since 2000.

While investors are scrutinizing data for signs of stronger growth and preparing for another corporate earnings season, they’re also keeping a close eye on signals from policy makers.

“The most important thing on investors’ minds are still central banks,” said  Christian Zogg, head of equity and fixed income at LLB Asset Management in Vaduz, Liechtenstein. His firm manages the equivalent of about $10bn.

“While a normalization of interest rates would probably give more confidence to market participants in the longer run, it’s clear that a change of central bank policies will add uncertainty and shake the market a little.”

Stocks in Europe slid amid investor concern that the European Central Bank is moving toward a less accommodative policy stance. Bloomberg News reported on Tuesday that an informal consensus was building in the ECB to gradually rein in quantitative easing.

The Stoxx Europe 600 Index lost 0.5% today, and fell as much as 1.2%. Crude rose to a three-month high near $50 a barrel after industry data indicated that US crude stockpiles plunged last week.

Chicago Fed President Charles Evans said Wednesday that the central bank will probably increase borrowing costs by the end of the year, joining calls this week from Cleveland Fed President Loretta Mester and her counterpart from Richmond, Jeffrey Lacker, to raise rates sooner rather than later.

Traders are placing odds for a December move at almost 60%, up 10 percentage points from last week. The probability of a November hike is 21%, according to data compiled by Bloomberg.

Wagers on a Fed rate increase eased slightly after a report today showed companies added the fewest number of workers in five months to US payrolls in September, indicating the labour market is cooling after strong gains for much of this year. 

Data are also due this morning on factory orders and expansion in services industries. Alcoa, which unofficially kicks off the earnings season, will report results on October 11.

Stocks have gotten off to a rocky start to the month, with the S&P 500 slipping 0.8% in the past two days. While gauge has historically been more volatile in October, it’s a month in which it posted larger gains in the last 25 years, with an average advance of 1.9%.

The measure closed 1.8% below the record it reached in August, trimming its annual gain to 5.2%.

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