US stocks closed solidly higher on Tuesday, the first session of 2017, although they lost some steam after oil prices made a downward correction late in the session.
Oil prices slid more than 2%, knocked off earlier 18-month highs as the US dollar rallied to its highest level since 2002 and traders took profits.
Initially, bullish PMI and Chinese data as well as 18-month high oil prices on growing hopes cartel OPEC will keep its word to cut supplies, all helped to boost the bourse after a damp squib end to the previous year.
A rally that began with the election of Donald Trump as the next US President on Nov 8 ended on Dec 30 with a droop by tickers.
But on Tuesday that was all forgotten as the Dow Jones Industrial Average rose 0.6% to 19,881. Intraday, it hit 19,938, meaning it was within 62 points of hitting the record 20,000 level. But that said, it was not its best performance. In mid-December the record level of 19,987 was hit.
The market bellwether S&P 500 closed up 0.9% at 2,257 and led by Centurylink (NYSE:CTL) up 6.6% to $25.34. But the volumes were still holiday-thinned. Just 17.8mln shares changed hands, about double its average daily volume.
The S&P Midcap 400 added 0.6% to 1,669 and was led by Allscripts Healthcare (NASDAQ:MDRX), up 7.2% to $10.95.
The S&P Smallcap 600 was up 0.6% at 843 and led by truck transportation group Celadon Group, Inc. (NYSE:CGI), up 22.4% to $8.75.
But unlike the S&P 500 and 400 which had initially been dominated by oil company gainers. Celadon held on and drove the small-caps higher.
The West Texas Intermediate, the US oil benchmark, up more than 2% early in the session, turned down by 2.3% to $52.47.
Meanwhile, Canada’s TSX Composite closed up 0.8% at 15,403 on its first trading day of 2017.
Early trading
US stocks opened sharply higher on the first session of 2017 on Tuesday after US PMI data jumped at its fastest rate in two years.
Fuelling the clutch of buoyant business and consumer confidence data in late 2016, the Institute for Supply Management’s PMI index rose in December to 54.7, from 53.2 in the previous month. That topped Wall Street expectations of 53.6 and was the highest level since December 2014. Figures above 50.0 indicate expansion.
That added to an already bright session outlook before the bell, as strong Chinese economic data was a shot in the arm for markets. The Caixin Purchasing Managers' Index, which tracks manufacturing activity in China, showed the fastest rate of improvement since January 2013.
Meanwhile, crude oil futures have hit their highest level in 18 months as traders express confidence that major oil producing nations -- led by cartel OPEC -- will follow through on promises to cut production. The oil benchmark WTI was 2.1% at $54.84.
The market bellwether S&P 500 was up 1% at 2,261 and led by oil stocks Marathon Petroleum Corp (NYSE:MPC) up 7.4% to $54.04 and Transocean Inc (NYSE:RIG) up 6.8% to $15.72.
The Dow Jones Industrial Average was returning to levels from where it could launch a fresh assault on the 20,000 record milestone. The Dow was up 0.8% at 19,916.
The S&P Midcap 400 was up 1.1% to 1,679 and led by oil stock Ensco Plc (NYSE:ESV) up 9.6% at $10.65 while the S&P Smallcap 600 was up truck transportation group Celadon Group (NYSE:CGI) up 11.9% at $8.00.
Pre-Open
US stocks are set to open sharply higher on Tuesday in the first session of 2017 – thanks to the strongest business data out of China in four years and highest oil prices in 18 months.
The Dow Jones Industrial Average is seen opening up more than 130 points or 0.7% which would take it up to around 100 points shy of breaking the 20,000 level it tried and tried and failed to accomplish in the last two weeks of 2016.
After a lower close on December 30, the last trading day of the previous year, all tickers are pointing higher.
The market bellwether S&P 500 is set to jump by 0.8% while the tech-heavy Nasdaq Composite could advance by 0.8% too.
Markets look set to defy the superstition that a rally the previous year starts with a fall in the next. But then, the markets did slide at the end of 2016 after a strong rally over the previous six weeks following the surprise election of Donald Trump as the 45th President of the United States. He will be inaugurated on January 20.
Meanwhile, the 115th U.S. Congress is sworn in on Tuesday.
Although there are many questions about the validity of Chinese data and whether heavy debt-laden companies will struggle, especially with the real prospects in sight of a trade war with Trump, on Tuesday the market was actually taking stock of some positive news out of China.
The pre-market upbeat mood is being attributed to strong Chinese economic data. The Caixin Purchasing Managers' Index, which tracks manufacturing activity in China, showed the fastest rate of improvement since January 2013.
The Chinese government's official manufacturing index was also positive, but not as upbeat as the Caixin report.
Meanwhile, crude oil futures have hit their highest level in 18 months as traders express confidence that major oil producing nations -- led by OPEC -- will follow through on promises to cut production.
The US oil benchmark West Texas Intermediate was up 2.2% at $54.92, having earlier peaked at $55.24 per barrel.
Shares in Xerox (NYSE:XRX) look set to surge at the open. The printer and copier maker's stock spiked more than 10% in the pre-market after broker JPMorgan upgraded its stock to "overweight" from "neutral," citing the spinoff of its Conduent business, "which marks the start of a long turnaround process." Xerox shares fell 17.87% last year. They were last up 8.5% at $6.24 pre-market.
Michael Kors (NYSE:KORS) shares were down 1% at $42.55 pre-market. Shares in the company have been on a steady decline since early December. But on Tuesday the stock was downgraded by investment analysts at Piper Jaffray Companies from an “overweight” rating to a “neutral” rating.
In data, the US ISM Manufacturing PMI for December is released at 1000 ET (1500 GMT) and forecast to be 53.6, advancing from 53.2 in November. A clutch of business confidence data, such as Michigan, late in December wobbled a bit after a slew of data since November pointed to renewed consumer and business confidence about the pro-business era of Trump ahead.