US stocks ended a three-day losing streak yesterday as recent underperformers led a thinly traded rally that wasn’t seen as strong enough to overcome worries about waning global demand.
The S&P 500 hit its lowest intraday level since 19 April on Tuesday, and recent weak breadth suggested selling had gone too far for now. Energy and materials shares, which have lived and died by hopes for robust global recovery, returned to their winning ways.
“Investors are tired of selling the market, especially with commodities finding their feet,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.
Energy shares gained on an unexpected drop in distillate stockpiles, which boosted heating oil futures. The S&P energy index advanced 1.5 per cent, by far the biggest percentage gainer among S&P 500 sectors. Dow component Exxon Mobil rose 0.8 per cent to $81.96 as the PHLX oil service sector index added 2.8 per cent.
Bespoke Investment Group said breadth in the S&P 500 was very close to extremely oversold levels and that it was a buying opportunity in March, which was the last time those levels were reached.
Despite that, further upside was seen as limited, given headwinds from Europe and the prospect of an environment without supportive monetary policy. “There’s a lot of listlessness, given the Eurozone issues and the volatility both ways in commodities, which is unsettling,” said Rob McIver, co-portfolio manager of the Jensen Portfolio in Portland Oregon.
The S&P material and industrial sectors’ indexes each rose about one per cent following a period of weakness for the groups.
The Dow Jones industrial average gained 38.45 points, or 0.31 per cent, to end at 12,394.66. The Standard & Poor’s 500 Index advanced 4.19 points, or 0.32 per cent, to 1,320.47. The Nasdaq Composite Index rose 15.22 points, or 0.55 per cent, to 2,761.38.
Flextronics International contributed to the larger gains in the Nasdaq, rising 3.8 per cent to $7.04 following an upgrade from Raymond James. Homebuilders’ shares also advanced after luxury builder Toll Brothers said orders rose in the latest quarter as low home prices induced its target market of the affluent to start buying again. The stock climbed 1.8 per cent to $20.63. The Dow Jones US home construction index advanced one per cent. New orders for long-lasting durable goods posted their largest drop in six months in April as aircraft and motor vehicle orders tumbled, a government report showed.