Dow climbs 520 points as oil retreats below $100
On Friday the Dow rose 520 points after four straight declines as WTI crude fell about 3% to $99.28 a barrel, easing near-term pressure on stocks.
The Dow Jones Industrial Average rose 520 points, or about 1%, on Friday, snapping a four-day losing streak. The S&P 500 gained 0.9% and the Nasdaq Composite added 0.8% as U.S. equities recovered.
West Texas Intermediate futures fell roughly 3% to $99.28 a barrel and Brent crude dropped about 3.1% to $104.32. Both contracts remained on track for weekly gains near 8% despite Friday’s decline. The slide under the $100 level for WTI reduced some immediate market pressure after a sharp rally earlier in the week tied to heightened tensions in the Middle East.
The rebound followed a mixed August consumer price index report, the last major inflation reading before the Federal Reserve’s policy decision next week. The Bureau of Labor Statistics said the headline CPI rose 0.4% month over month and 3.4% year over year. Core CPI, which excludes food and energy, rose 0.3% month over month and was 2.4% higher than a year earlier.
Traders increased the odds of a 25-basis-point rate hike at the Fed’s upcoming meeting, with the CME Group’s FedWatch tool showing roughly a 90% probability of a quarter-point increase. Markets earlier in the week had been pressured by rising oil prices and renewed rate-hike expectations, particularly for growth and technology stocks that are sensitive to borrowing costs.
Energy was a major contributor to August’s CPI rise. Gasoline prices jumped 3.9% and accounted for more than one-third of the monthly increase. The broader energy index rose 2.1% for the month and 16.3% from a year earlier. The food index increased 0.1% month over month and 2.7% year over year; food-at-home prices were unchanged for the month.
Market participants will watch the Fed’s statement and economic projections when the central bank concludes its two-day meeting on Wednesday. Investors also said they will monitor further developments in energy markets and any geopolitical events that could affect oil supply.
Douglas Beath of Wells Fargo Investment Institute commented that investors may focus on economic growth and corporate earnings in coming months despite higher rates, elevated oil prices and the midterm elections.
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