>>> US Close Dow+0.94% S&P+0.97% Nasdaq+0.80% Russell+1.04%

Closing Market Summary: Rebound in Oil Rallies Averages

The S&P 500 ended the Tuesday affair higher by 1.0%, taking part in a lockstep rally with crude oil. Other factors for today's gain included leadership from the heavily-weighted financial (+1.3%), health care (+0.8%), and industrial (+0.8%) sectors. The benchmark index (+1.0%) ended its day ahead of the Dow Jones Industrial Average (+0.9%) and ahead of the Nasdaq Composite (+0.8%).

Today's session began on a wobbly note as global growth concerns and earnings prospects pressured the major averages from their opening gains. Ahead of today's session the IMF lowered its 2016 growth estimate for the global economy from 3.4% to 3.2%. Meanwhile, mixed results in Alcoa's (AA 9.48, -0.26) first quarter earnings report also acted as a headwind. The company missed top-line expectations as revenue shrank 15.0% year-over-year.

On the commodities front, WTI crude began its day with a modest gain as investors eyed an upcoming meeting between oil producers in Doha. However, investors would not have to wait until Sunday for good news as reports indicated Saudi Arabia and Russia will freeze oil production at current levels even if Iran did not take part in a similar production cap. As a result, WTI crude climbed 4.1% ($42.12/bbl) before the end of its pit session. This represents a high for 2016 and a gain of 14.5% week to date.

The major averages followed the trajectory of oil after the news as the technology (+0.6%) and consumer discretionary (+0.8%) spaces recovered from some early losses. By the end of the day, all ten sectors were in the green with energy (+2.8%), financials (+1.3%), and materials (+1.2%) leading the advance.

Money center banks outperformed in the economically-sensitive financial (+1.3%) sector ahead of key earnings later this week. On that note, JPMorgan Chase (JPM 59.28, +1.08) gained 1.9% ahead of its first quarter report, which will be released tomorrow before the open. To be fair though, the rally in crude oil probably alleviated some pressure on the company as concerns about bad energy loans recede. JPMorgan Chase announced $600 million in loan loss reserves for energy and materials sector loans on February 23.

In the heavyweight health care space (+0.8%), AbbVie (ABBV 59.89, +1.39) outperformed after announcing that it received accelerated approval from the FDA for its chronic lymphocytic leukemia medication. Biotechnology ended ahead of the broader sector as Regeneron Pharmaceuticals (REGN 408.07, +11.93) extended its April gain to 13.2%.

CSX (CSX 24.99, +0.46) displayed relative strength in the industrial sector (+0.8%). The rail name is scheduled to report first quarter earnings after today's close. Elsewhere, Caterpillar (CAT 76.10, +1.47) gained 2.0% as the construction and farm equipment sub-group outperformed.

On the flipside, technology (+0.6%), consumer staples (+0.6%), and utilities (+0.7%) rounded out the leaderboard. In the influential technology sector (+0.6%), heavily-weighted Facebook (FB 110.61, +1.62) rallied as the company's CEO Mark Zuckerberg announced a new messenger platform. Meanwhile, the broader space underperformed as Juniper Networks (JNPR 23.06, -1.83) weighed on the networking sub-group. The stock fell 7.4% after the company lowered its top and bottom-line guidance for the first quarter.

The U.S. Dollar Index (94.00, +0.05) ended its day narrowly above its flat line as losses against the Canadian dollar partially offset gains against the yen and the euro. The dollar ended lower by 1.1% against the commodity-sensitive currency (1.2757). Meanwhile, the euro lost 0.2% against the dollar (1.1389) while the dollar/yen pair finished at 108.51 (+0.5%).

The Treasury complex ebbed lower as the rally in the broader market continued. The yield on the 10-yr note finished at 1.77% (+5 bps).

Participation was above the recent average as more than 951 million shares changed hands on the NYSE floor.

Today's economic data included March Import and Export Prices and the Treasury Budget for March: 

  • Specifically, a 4.9% increase in import fuel prices in March helped drive a 0.2% increase in the price index for U.S. imports.
    • That is the first monthly increase since June 2015, although it would be remiss not to add that the import price index is still down 6.2% year-over-year.
    • Excluding fuel, import prices declined 0.1% for the third straight month with falling prices for consumer goods, food, and capital goods offsetting rising prices for nonfuel industrial supplies and materials.
  • Export prices, meanwhile, were unchanged in March after declining 0.5% in February, leaving them down 6.1% year-over-year.
    • Excluding agriculture, the price index for nonagricultural exports rose 0.3% with higher prices for nonagricultural industrial supplies and materials more than offsetting falling auto prices.
    • That was the first monthly increase for that measure since May 2015.
  • The Treasury Budget statement for March showed a deficit of $108.0 billion. This Treasury data is not seasonally adjusted so the March deficit cannot be compared to the February surplus of $52.9 billion

Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index while March Core PPI (consensus 0.2%) and Retail Sales for March (consensus +0.1%) will be released at 8:30 ET. Finally, February Business Inventories (consensus -0.1%) and the Fed's Beige Book for April will be released at 10:00 ET and 14:00 ET, respectively.   

Additionally, China's Trade Balance for March is tentatively scheduled to be released at 21:40 ET. 

  • Nasdaq Composite -2.7% YTD
  • Russell 2000 -2.7% YTD
  • S&P 500 +0.9% YTD
  • Dow Jones +1.7% YTD

>>> Fed's Harker (non-voter, hawkish) - more comments

Fed's Harker (non-voter, hawkish): Prudent to wait for more inflation growth before raising rates again, fewer rate increases should be needed to attain policy neutrality than in past recoveries 
- Expect faster wage growth could translate into more robust inflation levels- Fed needs to move more cautiously when inflation is low
- Inflation will only move back to 2% very gradually
- If headwinds dissipate quickly and inflation picks up, Fed will need a more aggressive policy approach
- We will reach our employment mandate very soon, if we haven't already
- Slower China growth and USD strength are downside risks to the outlook- US consumer spending is growing at a solid pace

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: JNPR -7.5%, FAST -3.7%, AA -3.6%

Other news: NOK -1.5% (likely trading lower in sympathy with peer ERIC (ERIC initiated with Sell at CS), SRC -1.3% (upsizes offering by 3 mln shares and prices 30 mln shares of common stock at $11.15), CSCO -1.3% (may be in sympathy with JNPR),GWW -1% (in sympathy with FAST (FAST reported earnings))

Analyst comments: FUEL -3.7% (resumed with a Sell at Citigroup), SBUX -2.3% (downgraded to Hold from Buy at Deutsche Bank), ERIC -1.5% (initiated with a Sell at Credit Agricole), PHH -1.1% (downgraded to Neutral from Buy at Sterne Agee CRT),AVP -1% (downgraded to Neutral from Overweight at Piper Jaffray).