Surge in price of oil pushes energy stocks, market higher
NEW YORK (AP) — U.S. stocks edged higher in early trading Thursday on Wall Street as a spike in oil prices boosted energy stocks following a suspected attack on two oil tankers in the strategic Strait of Hormuz.
U.S. oil rose 3.2% and Brent crude, the international benchmark, gained 2.8%. The gains come at a time when oil prices have been falling on signs demand is declining. Exxon rose 1.2% while oil services company Schlumberger gained 2.4%.
Technology and media shares also rose. The higher opening puts the market on track for its first gain in three days during a week of choppy trading. Investors have been searching for direction as they cautiously await any new developments on the global trade war between the U.S. and China. Any continued escalations could crimp global economic growth and put the brakes on what is poised to be the longest economic expansion in U.S. history.
A mix of chipmakers and others pushed the technology sector broadly higher. The sector is particularly sensitive to trade disputes and a large portion of chipmakers rely heavily on China for revenue. Apple rose 1.2% and Nvidia rose 1.8%.
The surge in oil prices lifted energy stocks and the incident in the Strait of Hormuz comes amid heightened tensions between the United States and Iran. One third of all oil traded by sea, which amounts to 20% of oil traded worldwide, passes through the strait.
Thursday's gains marked a reversal of course for oil prices, which dragged down the energy sector on Wednesday and have fallen more than 20% since late April. Still, it's unclear whether Thursday's gain can last. Jim Ritterbusch of Ritterbusch & Associates said in a note to clients the jump is factoring in a worst case scenario and oil is "apt to relinquish the bulk of gains as additional details emerge."
In addition, one reason for oil's recent decline has been concern among traders that global demand is slipping, and Thursday OPEC forecast demand would grow by 1.4 million barrels a day in 2019, down by 700,000 barrels a day from its previous forecast. OPEC said it lowered the forecast due to sluggish oil demand data in from Western countries during the first quarter. While global demand appears to be slipping, supplies remain high.
KEEPING SCORE: The S&P 500 index rose 0.4% as of 10:40 a.m. Eastern time. The Dow Jones Industrial Average rose 72 points, or 0.3%, to 26,078. The Nasdaq composite rose 0.6%.
Consumer-oriented stocks and financial companies also gained ground. Macy's rose 1.4% and Amazon rose 1.2%. Morgan Stanley rose nearly 1%.
Health care stocks swayed between small gains and losses and safe-play sectors including consumer staples and utilities also lagged the market.
Tyson Foods rose 1.8% after saying it plans to sell chicken nuggets made from pea protein and a burger than is part pea protein part beef. Beyond Meat, which makes plant-based burgers, fell 4.2%.
Solid earnings and forecasts helped lift several stocks. Home furnishings retailer RH and athletic apparel company Lululemon gained ground.
UPWARD FACING STOCK: Lululemon rose 3.4% after stretching beyond Wall Street's profit and revenue forecasts for the first quarter.
The maker of athletic apparel popular with yoga practitioners also raised its profit forecast for the year.
The company has been building up its online sales capabilities and reported a sharp increase its direct-to-consumer business during the most recent quarter.
FURNISHING PROFIT: Furniture and houseware retailer RH surged 20% after the company blew past Wall Street's first quarter profit forecasts and raised its own profit forecast for the year.
A late-March boost in revenue was particularly helpful for the retailer. The company also said that it raised some prices to offset the impact of tariffs and moving some production out of China. Still, it doesn't expect the tariffs to have a long-term impact on its financial goals.