U.S. stocks traded sharply higher on Tuesday on continued momentum from strengthening oil prices and encouraging developments in the Euro zone.
“We’ve got a continuation of strength. Looks like the two major drivers of yesterday’s strength are still with us today,” said Art Hogan, chief market strategist at Wunderlich Securities.
The Dow Jones Industrial Average briefly gained more than 200 points, or more than 1 percent, before holding around 170 points higher. Caterpillar rose about 3 percent to lead blue chip gains. Exxon Mobil and Chevron followed, each rising more than 2 percent.
“With crude between $50 and $55, a lot of people are going to see Caterpillar as cheap,” said Marc Chaikin, CEO of Chaikin Analytics.
The energy sector rose more than 2 percent to lead advancers on the S&P 500, on track for 4 straight days of gains and the best day since Jan. 16, when the sector gained 3.19 percent.
Firming oil prices and news out of Greece cheered U.S. markets into the close on Monday, putting the S&P 500 above 2,000 points in the close and the Dow up nearly 200 points.
The S&P closing above that key level is “significant,” Cardillo said. “Perhaps it will set the stage for less volatility in the month of February and more tranquility as the ECB launches its quantitative easing program.”
Oil extended the past few days’ gains to trade nearly 3 percent higher on Tuesday to hold above the key $50 level.
We’re “obviously seeing a rebound in some of the oil sector,” said Randy Frederick, managing director of trading and derivatives at Charles Schawb. “Overall the market has been weak, until late yesterday, so it’ll be interesting to see if it holds up.”
Greece’s Finance Minister Yanis Varoufakis unveiled proposals on Monday to end the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, the Financial Timesreported. On Tuesday, Greek Finance Minister Yanis Varoufakis meets with his Italian counterpart in Rome.
“This is a back and forth that’s going to go on for a while,” Frederick said. “The question is where it may go. We’ve got several weeks before we find out what happens.”
Factory orders for December posted a greater-than-expected decline of 3.4 percent. Analysts expected a decline for the month, especially with Monday’s weaker ISM manufacturing numbers. A smaller-than-previously reported drop in business spending plans supported a likely rebound in the months ahead.
Auto sales come out throughout the day, and analysts are encouraged by the initial reports.
“If you were concerned, I think the consumer is spending on bigger ticket items,” Hogan said.
U.S. futures gained on Tuesday, following European and Asian bourses higher as oil prices rebounded.
Reporting before the bell, UPS matched estimates with adjusted quarterly profit of $1.25 per share, while revenues were above forecasts. However, the company said its results were below its own expectations, and it also forecast full-year results below Street forecasts. It plans to address these issues with cost and revenue actions, although UPS adds that customers were “delighted” with its service during the holiday season.
BP posted better-than-expected replacement cost profit of $2.2 billion for the fourth quarter, despite taking a $3.6 billion impairment cost. In a television interview, CEO Bob Dudley warned that oil prices could remain as low as $50 per barrel “for some time.”
London-listed shares of BP rose as much as 4 percent after the results were out.
The S&P 500 traded up 10 points, or 0.52 percent, at 2,031, with energy leading gains across all sectors except utilities and health care.
The Nasdaq pared gains to rise 3 points, or 0.07 percent, at 4,680.
The major indices are still down more than 1 percent for the year.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell to trade just above 18.
Four stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 234 million and a composite volume of 1.1 billion as of 10:40 a.m.
The U.S. 10-year Treasury yield rose to 1.75 percent. The U.S. dollar fell against major world currencies.
Crude oil futures gained $1.44, or 2.90 percent to $51.03 a barrel on the New York Mercantile Exchange. Gold futures fell $11.20, or about 1 percent, to $1,265 a barrel as of 10:39 a.m.
On tap this week:
12:45 p.m.: Fed’s Kocherlakota speaks
Earnings: General Motors, GlaxoSmithKline, Merck, Toyota Motors,Automatic Data, Boston Scientific, Clorox, Humana, Marathon Petroleum, Motorola Solutions, Ralph Lauren, Sony, Whirlpool, 21st Century Fox, Allstate, CBRE Group, Everest Re, Keurig Green Mountain, Lincoln National, Prudential Financial, Under Armour,Weatherford International, Yum Brands
7:00 a.m.: Mortgage applications
8:15 a.m.: ADP Employment report
9:45 a.m.: PMI Services Index
10:00 a.m.: ISM non-Manufacturing Index
10:30 a.m.: Oil inventories
12:45 a.m.: Fed’s Mester speaks
Earnings: AstraZeneca, BNP Paribas, Daimler, Philip Morris, Sanofi, Michael Kors, Sirius XM Radio, Sprint, TevaPharma, Activision Blizzard,CME Group, Expedia, GoPro, LinkedIn, McKesson, News Corp., Nuance Communications, Symantec, Twitter, Buffalo Wild Wings, Lionsgate,Pandora, Tempur Sealy, Yelp
5:00 a.m.: Fed’s Rosengren speaks
7:30 a.m.: Challenger Job-Cut report
8:30 a.m.: International trade
8:30 a.m.: Jobless claims
8:30 a.m.: Productivity & costs
10:30 a.m.: Natural gas inventories
3:00 p.m.: Treasury STRIPS
4:30 p.m.: Fed balance sheet/Money supply
8:30 a.m.: Nonfarm payrolls
12:45 p.m.: Fed’s Lockhart speaks
3:00 p.m.: Consumer Credit