U.S. stocks changed direction multiple times during the last trading session, opening with broad rally, moving down, and then drifting higher again before the closing bell.
Energy Rout Continues
Energy shares were the biggest losers as oil prices continued to fall Tuesday. Oil dropped almost 5 percent on Tuesday after the International Monetary Fund reduced its 2015 global economic outlook to the steepest since January 2012 and key producer Iran hinted prices could hit $25 a barrel without supportive OPEC action.
“The global economy’s going to continue to weaken, and crude prices are going to continue on their path to the point where we start to see production drop in the U.S.,” said Matt Smith, commodity analyst at Schneider Electric SA, an energy-consulting firm.
Oil Minister Bijan Namdar Zanganeh said “If the oil prices drop to $25 a barrel, there will yet again be no threat posed to Iran’s oil industry.”
OPEC members and non-OPEC producers must cooperate “to generate investment in the oil industry,” Zanganeh said. “This will bring about desired conditions for both producers and consumers.”
Gold and silver mining stocks were among top gainers as the group jumped with precious metals prices. Gold extended six-day rally to settle at its highest price in five months Tuesday, after the Swiss National Bank last week caused selloff in currency markets and investors shifted their focus to this week’s meeting of the European Central Bank. Gold for February delivery ended the day up $17.30 or 1.4% to reach at $1,294.20 an ounce, on the New York Mercantile Exchange, as signs of slowing global economies increased demand for the metal as a haven. That’s the best settlement for bullion since Aug. 19. The seven-day rally, the longest rally since Feb. 18, helped gold prices to achieve a 7.1% rise.
“People are rediscovering gold since there is so much uncertainty about Europe,” George Gero, a New York-based precious-metal strategist at RBC Capital Markets LLC, said in a telephone interview. “They want to safeguard against the global economic weakness.”
“Demand for gold should also remain buoyant ahead of the ECB’s meeting on Thursday and the elections in Greece at the weekend,” said Commerzbank’s Eugen Weinberg in a note Monday.
“The sharp price rise at the end of last week was accompanied by high inflows into gold ETFs: holdings in the gold ETFs tracked by Bloomberg were increased by 26.2 tons on Thursday and Friday combined.” Weinberg said. “This represented the highest inflows on two consecutive days since November 2011.”
Silver futures for March delivery added 1.2 percent to settle at $17.956 an ounce. Earlier, the price traded at $18.045, the best not seen since Sept. 19.
Housing Stocks Take A Hit
Shares of homebuilders and other housing-related stocks have come under pressure after a popular index measuring homebuilder confidence in the housing market unexpectedly fell by one point to 57 this month from 58 in December, industry data showed on Tuesday. While the National Association of Home Builders/Wells Fargo builder sentiment index was lower than the 58 the market had forecast, any reading above 50 mean more respondents report good market conditions.
The latest reading is in line with the NAHB’s expectation for the US housing market to keep growing at a gradual pace this year.
The residential construction industry suffered big selloff in the stock market after last week’s margin concerns from key industry players like Lennar and KB Home. In addition, Credit Suisse downgraded several home builders.
Demand for homes is expected to get benefited in 2015 from a strengthening job market and mortgage rates near historically low levels. Last week, it was reported that consumer confidence rose this month to the best level in more than a decade, raising the odds more households will be looking for residences.
“Steady economic growth, rising consumer confidence and a growing labor market will help the housing market continue to move forward in 2015,” David Crowe, NAHB chief economist, said in a statement.
Airline Stocks Flying High
The airline industry group climbed higher on Tuesday in the wake of another decline in oil prices and upbeat quarterly results from Delta Air Lines. The company’s earnings and revenue both topped Wall Street’s estimates.
Delta posted earnings per share of 78 cents for the fourth quarter on revenue of $9.65 billion, a 6.3% increase from the year-ago quarter. Analysts had expected EPS of 77 cents with $9.58 billion in revenue.
The results were strong as it spent 83%, or $1.8 billion less on fuel in the quarter versus the same period last year due to lower oil prices. The oil slump also helped it save $1.2 billion in the value of Delta’s fuel-hedging transaction.