US mid- and small-cap stocks outperformed their bigger cousins on Wall Street on Thursday, as oil prices hit 3-1/2 month highs, as the resource was boosted by a dovish Federal Reserve and renewed optimism of a fuel supply cap.
The bourse barometer, the S&P500 closed up 0.66% at 2,040, while the S&P Midcap 400 was well ahead, up 1.05% at 1,421. The S&P Smallcap 600 closed up even more, gaining 1.74% to 672, while the broader small-cap Russell 2000 rose by 1.56% to 1,091 and demonstrating that the S&P 600 gains were not arbitrary.
The Fed's decision to scale back rate hikes for 2016 hit the US dollar, which makes commodities denominated in the currency expensive and is seen as supportive of global demand.
Separately, there was fresh news of a meeting next month aimed at finalising the deal to freeze global oil supplies at January levels. Qatari minister Mohammed bin Saleh al-Sada said the initiative now had the support of 15 OPEC and non-OPEC producers, accounting for around 70% of global output.
The Wall Street Journal added that it now looks likely talks will go ahead and a deal be signed even without the presence of Iran, which has said it will only consider capping exports once it returns to a pre-sanctions level of four million barrels a day.
The US oil benchmark West Texas Intermediate was up 4.8% at $40.29 - its highest level since December 1.
Midsession
US stocks were higher at midsession Thursday, buoyed by oil prices scaling $40 for the first time since early December and the dovish tone of the Federal Reserve.
The broad S&P500 was up 0.8% at 2,044, while the S&P Midcap 400 outperformed, up 1% at 1,420.
The S&P Smallcap 600 was up 1.33% at 669 while the wider small-cap ticker Russell 2000 was up 1.2% at 1,086. Stocks like Rofin-Sinar Techs (NYSE:RSTI) and Helix Energy Solutions (NYSE:HLX) which are components of both S&P600 and Russell 2000, led both tickers. with gains of 37% and 26% respectively. Rofin stock benefits from new that the company was entering into an agreement to be acquired by bigger rival Coherent (NASDAQ:COHR).
The Fed decision to leave rates on hold Wednesday and to scale back probably rate hikes to no more than two in 2016 from as many as four back in December, was felt in the forex markets, the front line of expectations over rates, where investors were taken totally by surprise by the scale back on rates. The dollar slid versus the euro. Before the Fed decision a dollar was worth 90 euro cents. Twenty-four hours later it is 88 cents.
The US benchmark West Texas Intermediate was up 4.1% at $40.04 - its highest level since December 3.
Open
After finishing the session higher on Wednesday, US stocks made a pretty unspectacular start to the session on Thursday.
All three major indices were lower, with the NASDAQ falling furthest, down 0.3% or 16 points to 4,747.
It was a similar story in the mid and small cap worlds, with the S&P 400 around 3 points lower to 1,404, while the Russell 2000 was eased 4 points to 1,070.
The big gainer of the day was laser products maker Rofin-Sinar Technologies (NASDAQ:RSTI), after it struck a $942mln deal to be taken over by Coherent Inc. (NASDAQ:COHR). Shares jumped 37% to $31.40.
Also up was specialty pharma developer Elite Pharmaceuticals Inc (OTCBB:ELTP) as the all-important US FDA accepted its new drug application for its lead opioid abuse-deterrent candidate and granted it a priority review.
The firm is developing drugs to curb substance abuse and shares rose around 18.5% to $0.35
In other company news, FedEx (NYSE:FDX) shares added more than 9% after the shipping company issued a favorable outlook and said profit rose to $692mln compared to $586mln in the same period last year.
It wasn’t all plain sailing, however, as Bioblast Pharma (NASDAQ:ORPN) wasted no time capitalising on an enthusiastic market response to the latest trial of its OPMD treatment.
Shares jumped over 100% Wednesday as the group reported significant improvements in the swallowing abilities of 25 patients treated with its new drug trehalose.
On Thursday, the firm announced a $6.7mln placing at $3.10 per share, sending its share price falling 23.5% to $3.10.