US shares closed lower on Wednesday in spite of a surge by energy stocks on the back of OPEC’s historic supply cull deal.
The S&P 500 market bellwether closed down 0.3% at 2198 – having earlier struck an intraday high of 2,214.10.
Oil stocks like Marathon Oil Corp (NYSE:MRO) up 20.8% to $1806 led the gains, alrthogh with no less than a dozen other energy stocks dominating the gainers. But the losers carried the day and the top loser was Vertex Pharmaceutic (NASDAQ:VRTX) down 4.7% to $81.61.
Earlier, OPEC delivered what was hoped for – an agreement to cut supply by 1.2mln barrels of oil a day across the cartel. That includes a freeze on any growth in Iran's output beyond the agreed pre-sanction levels the country has produced since relations with the US thawed.
The US oil benchmark WTI was up 8.4% at $49.04. Earlier in the session, before the OPEC deal was announced the oil future hit $49.84 – its highest level since late October. A rally yes but hardly a breathtaking gain now that the cartel has provided some certainty.
The S&P Midcap 400 closed down 0.2% at 1627 while the S&P Smallcap 600 closed down 0.3% at 812.
Early trading
US stocks pared gains on Wednesday as markets grew anxious that OPEC can deliver an oil supply cut this session but energy shares marked double-digit percentage gains.
The S&P 500 market bellwether was up 0.1% at 2207 as data and OPEC dominated attention.
Even as inventories of US crude fell for the second straight week investors focused their attention on Vienna where Saudi Arabia and Iran said they were hopeful of reaching a deal to cut crude supplies. A press conference is scheduled for just after 1600 GMT.
Stockpiles of US crude unexpectedly fell by 884,000 barrels in the week to November 25 and at 488.1mln barrels, remain near the upper limit of the average range for this time of the year, according to the Energy Information Administration. That compared with expectations for a rise of 677,780 barrels.
But oil companies continued to rise, with the S&P 500 led by the likes of Marathon Oil Corp (NYSE:MRO) up 15.4% to $17.25.
The S&P Midcap 400 was up 0.2% to 1633, also off its session best, and led by oil stocks as well, with Wpx Energy (NYSE:WPX) crowned the top gainer of 17.9% to $14.36.
The S&P Smallcap 600 was up 0.3%, the best gainer of the pack, at 816 and led by energy stocks such as Atwood Oceanics (NYSE:ATW) up 16.1% to $9.08.
Providing further buoyancy to the market, a forward-looking indicator of US home sales edged slightly higher in October, indicating steady recovery in the country’s housing market.
The National Association of Realtors said pending home sales, based on signed contracts to buy previously-owned single-family homes, rose 0.1% from September, in line with economists’ estimates.
Meanwhile, US personal income climbed last month at the fastest rate since April, highlighting the growing upward pressure on wages from a tighter job market.
Personal income rose 0.6% in October from September, according to data from the Commerce Department. Wall Street economists had forecast a 0.4% increase.
Stronger data certainly point to a rate hike from the Fed on Dec 14, although if OPEC cuts supply and it leads to higher energy prices, a rate hike might confuse markets. Although higher oil prices will raise inflationary pressures the central bank needs to curb, higher oil prices will also be a clamp on growth prospects further down the line.
Pre-Open
US stocks are expected to open firmer on Wednesday with the prospect of the S&P 500 and Dow Jones Industrial Average reclaiming fresh record highs, as investors eye a rebound in energy stocks amid renewed expectations OPEC will reach an agreement to curb production.
The market bellwether S&P 500 is indicated opening up 0.3%. On Tuesday, both the S&P and Dow finished slightly below their record closing highs marked on November 25.
The WTI price of crude oil jumped 8% Wednesday to $48.90 per barrel on optimism that major oil producers were closing in on a deal to cut production at a meeting in Vienna.
Saudi Arabia, the cartel's de facto leader, hinted that it would allow regional rival Iran to pump at pre-sanction levels as part of a deal.
The oil cartel has been trying for a year to freeze or cut production in hopes of boosting prices.
In September in Algiers, producers achieved a breakthrough and preliminarily agreed to trim output for the first time since 2008. The deal is to be confirmed in Vienna today.
The deal being brokered is tipped to involve allowing exemptions for Nigeria, Libya and Iran.
OPEC said before the meeting they are hoping to cut output to roughly 32.5mln from around 33.6mln at present.