Real estate and utilities sectors lead gains
U.S. stocks finished Tuesday's session with modest gains on 17 September 2019 on the back of defensive bets, as investors focused on a decision on interest rates from the Federal Reserve set for Wednesday after a weekend attack in the Middle East that has roiled global energy markets.
The Dow Jones Industrial Average gained 33.98 points, or 0.1%, to close at 27,110.80, while the S&P 500 rose 7.74 points, or 0.3%, to end at 3,005.70, supported by gains in real estate and utilities sectors. The Nasdaq Composite Index advanced 32.47 points, or 0.4%, to 8,186.02.
After after spiking nearly 15% yesterday, WTI crude pulled back 5.0% after Saudi Arabia said it intends on restoring full oil production by the end of September. In addition, the repo rate spiked as high as 10% today on no specific catalyst.
Nine of the 11 S&P 500 sectors finished higher.
Back to the Fed, the market expects the central bank to cut the fed funds rate by 25 basis points, which would strengthen the market's improving outlook on the U.S. economy. Separately, the New York Fed announced a repurchase operation of up to $75 billion worth of assets in order to regain control of its fed funds rate. The midpoint of transactions in the overnight money markets hit the upper limit of the 2.00-2.25% target range.
The 2-yr yield and the 10-yr yield declined three basis points each to 1.73% and 1.81%, respectively. The U.S. Dollar Index lost 0.4% to 98.22.
Ahead of Wednesday's policy statement, U.S. economic data were upbeat, with industrial production up 0.6% in August, the largest gain in a year and the home-builder confidence index up one point to 68 in September. Industrial production increased 0.6% mom in August which was much stronger than expected and followed an upwardly revised 0.1% decline (from -0.2%) in July. Total capacity utilization ran at 77.9%, up from 77.5% in the prior month. The key takeaway from the report is that all of the major market groups recorded gains in August, which is a reassuring development in terms of the economic growth outlook.
The NAHB Housing Market Index for September increased to 68 (consensus 66) from 67 in August (revised from 66).
Bullion prices ended higher at Comex on Tuesday, 17 September 2019. Gold futures on Tuesday marked a second gain in a row, extending a climb to the highest price in about a week. Traders continued to monitor developments tied to the attacks on Saudi Arabian oil-infrastructure as they shifted focus to the Federal Reserve decision Wednesday on interest rates.
December gold on Comex tacked on $1.90, or 0.1%, to settle at $1,513.40 an ounce, after a 0.8% gain on Monday. Prices for the most-active contract marked their highest settlement since Sept. 6 for a second straight session. Silver for December delivery added 11.4 cents, or 0.6%, to end at $18.14 an ounce, after a 2.6% rally on Monday.
Crude oil futures dropped sharply on Tuesday, 17 September 2019 after Saudi Arabia's energy minister said the kingdom's crude production could return to normal as soon as the end of the month, as the nation recovers from weekend attacks on crucial processing facilities. Fear of a prolonged disruption to output from Saudi Arabia, the biggest producer of oil in the world, sent ripples through global energy markets and drove international futures prices to one of the sharpest rallies on record.
Oil prices on Tuesday had been trading sharply lower, weighed by a Reuters report that the Saudis were close to restoring 70% of the estimated 5.7 million-barrels-per-day of production lost after parts of the oil-processing facility were damaged.
West Texas Intermediate crude for October delivery, the U.S. benchmark contract, fell $3.56, or 5.7%, to settle at $59.34 a barrel on the New York Mercantile Exchange. On Monday, it posted the largest daily gain for the most-active contract since Sept. 22, 2008.
November Brent crude lost $4.47, or 6.5%, to end at $64.55 a barrel on ICE Futures Europe, following the international benchmark contract's 14.6% rise on Monday, the sharpest percentage gain on record.
Looking ahead, investors will receive the Fed's policy decision, which will include economic and interest rate path projections, Housing Starts and Building Permits for August, and the weekly MBA Mortgage Applications Index on Wednesday.
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