US stocks extended a rally for a third day in a shortened trading session yesterday as sharp gains in oil prices lifted energy shares and traders factored in increased expectations for central bank stimulus.
A raft of weak economic data has raised hopes that the European Central Bank will cut interest rates to a record low tomorrow in a move that could drive stock markets higher and further lift commodities like oil and copper.
Yesterday’s gains came on a shortened trading day before the 4 July Independence Day holiday when US markets are closed. Trading volume was the lowest of the year at 3.78bn shares on the NYSE, Nasdaq and AMEX.
Brent crude oil topped $101 a barrel for the first time in three weeks as tension over Iran increased concerns about threats to supply and as investors bet on further policy action.
US crude was up $3.50 at $87.25 a barrel. The S&P’s energy stocks sector was the top gainer, up 2.2 per cent.
Eric Kuby, chief investment officer at North Star Investment Management in Chicago, said that last week’s European summit, which sparked the rally with measures to ease the bloc’s crisis, has raised expectations that policymakers globally are waking up to the need to support financial markets and the economy.
“We have been in rally mode,” he said. “It’s hard to buy into the actual economic numbers as really moving the market as they seem to be so dwarfed by the this whole global liquidity situation.”
The Dow Jones industrial average gained 72.43 points, or 0.56 per cent, to 12,943.82. The Standard & Poor’s 500 Index rose 8.51 points, or 0.62 per cent, to 1,374.02. The Nasdaq Composite Index added 24.85 points, or 0.84 per cent, to 2,976.08.
The euro rallied, climbing to a session peak as investors positioned for the European Central Bank policy meeting.
Major carmakers also posted stronger-than-expected sales gains in June. Shares of Ford and General Motors rose on the news. Ford gained 2.2 per cent to $9.60 while General Motors rose 5.6 per cent to $20.67.
The S&P 500 has gained 3.4 per cent over the last three sessions, its best such run since December. The move has lifted the S&P 500 out of a recent trading range of 1,350-1,360, meaning stocks could advance to a higher range, according to analysts at Brown Brothers Harriman.
Stocks posted their biggest one-day gain of the year on Friday after European policymakers said EU emergency funds could be used to buy bonds of debt-stricken countries.
Microsoft shares rose 0.7 per cent yesterday. The company said its purchase of aQuantive, its largest acquisition in the Internet sector, was effectively worthless and wiped out any profit for the past quarter.