U.S. stocks closed higher Wednesday as some stabilization in oil prices offset declines in financials to help stocks recover from an intraday decline of more than 1 percent. ( Tweet This )
“I think it’s the move in crude and month-end flow,” Jeremy Klein, chief market strategist at FBN Securities, said, noting many investors were waiting on the sidelines for the month-end to get out of the way and to see if the S&P 500 could break 1,950.
“Despite all that (talk of oil prices heading lower) crude is hanging in there and we’re not just getting swung around by it. Then you have the chance to bring in some buyers,” he said.
The major U.S. averages came well off session lows in midday trade to turn higher and extend gains as the close approached.
The Russell 2000 turned positive after dropping 1.5 percent at session lows. The S&P 500 and Nasdaq composite also recovered intraday losses of more than 1 percent to try for gains in afternoon trade. The Dow traded more than 50 points higher, with United Technologies contributing the most to gains.
“Right now you’re seeing the fear trade coming off. … It looks like investors are coming back in for the time being,” said John Caruso, senior market strategist at RJO Futures.
Treasury yields mostly turned higher and gold came off session highs.
Oil recovered from a sharp overnight decline to settle up 28 cents, or 0.88 percent, at $32.15 a barrel.
“Probably the DOE report is actually helping as support to WTI today. That’s why it’s not falling as it was in the pre-market,” said Luana Siegfried, energy research associate at Raymond James.
The U.S. Department of Energy’s weekly crude inventory data said U.S. oil barrels rose by 3.5 million, about half what the American Petroleum Institute reported late Tuesday.
The Nasdaq composite outperformed, holding about half a percent higher in afternoon trade as Apple gained more than 1 percent and shares of Facebook turned positive.
Financials pared losses to trade a touch lower as the only S&P 500 decliner, while energy and materials reversed losses to lead gains. The S&P briefly fell below the psychologically key 1,900 level, but recovered to trade within 10 percent below its 52-week intraday high, out of correction territory. The Dow and Nasdaq composite remained more than 10 percent below their 52-week intraday highs, in correction.
“It’s sort of a reflex bounce (in oil). It’s not enough to pull the market into positive territory. It’s primarily the financials that are dragging (down) the market,” Marc Chaikin, CEO of Chaikin Analytics, said earlier as stocks came off session lows.
“When financial stocks are trading poorly that’s an indication there’s a lack of confidence in the system and it has negative implications for the market,” he said.
The Dow Jones industrial average held about 10 points lower in choppy afternoon trade, with Boeing, UnitedHealth and Caterpillar the greatest contributors to declines.
“The market got overbought up until yesterday and the weakness in oil, the weakness in the yuan, the weakness in European banks is just a reminder the overarching concerns people have are still there,” said Peter Boockvar, chief market analyst at The Lindsey Group.
Earlier, the Dow fell more than 250 points. Stocks extended opening losses after new home sales for January hit 494,000, below the expected 520,000, while the Markit Flash February report on services PMI came in at 49.8, down sharply from 53.2 in January and a touch below the key 50.0 level.
Traders said there was not a fundamental reason for the decline in stocks following the services PMI given the light trade volume and the relative newness of the indicator.
“I don’t think the data matters. It’s about fear. … PMI has been weak everywhere. That’s not news,” said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.
However, the soft economic reports came after Fed policymakers indicated rate hikes remain a possibility.
Read More Oil, Fed in focus for Street
Richmond Federal Reserve President Jeffrey Lacker said in a Reuters report Wednesday there is still a case for raising interest rates further, a sign the central bank’s internal debate over rate hikes remains a live one.
Dallas Federal Reserve President Robert Kaplan said later on Wednesday in a Reuters report that his more downbeat assessment of the U.S. central bank’s path of rate hikes will be reflected at the next policy meeting in March.
Fed Vice-Chairman Stanley Fischer said late Tuesday that Fed officials “simply do not know” what course of action they would take at their next meeting three weeks from now, adding that it was too early to assess the impact of current market volatility.
St. Louis Fed President James Bullard is due to speak after the closing bell at 7.00 p.m. ET.
U.S. crude oil futures declined Tuesday after Saudi Oil Minister Ali al-Naimi said production cuts won’t happen, although producers will hopefully meet in March to negotiate an output freeze. Oil extended losses after the settle late Tuesday following news that domestic crude stockpiles grew by more than twice expectations, according to American Petroleum Institute data cited by Reuters.
European stocks closed about 2 percent lower or more. The STOXX Europe 600 fell nearly 3 percent, ending almost 40 percent below its 52-week intraday high.
Overnight, the Chinese yuan midpoint fix was also set slightly weaker against the dollar. However, the Shanghai composite closed about 0.9 percent higher while most Asian equities declined.
Treasury yields held above session lows, with the 2-year yield at 0.73 percent and the 10-year yield at 1.71 percent as of 2:02 p.m. ET.
“When you add it all together, weak energy, huge currency moves, and weak economic data, those are going to lead to this kind of sell-off,” said Art Hogan, chief market strategist at Wunderlich Securities.
The U.S. dollar index turned lower, with the euro higher at $1.10 and the yen at 111.48 against the greenback. Pound sterling continued to weaken against the dollar amid concerns over the U.K.’s possible departure from the European Union.
“The percentage moves you’re seeing in the British pound are disruptive for equity markets; the percentage moves your seeing in the yen are disruptive,” Wunderlich’s Hogan said.
U.S. stocks closed lower Tuesday, as hopes of an oil production cut were dashed and after a miss in the consumer confidence index.
In midday trade, the Dow Jones industrial average (Dow Jones Global Indexes: .DJI) fell 120 points, or 0.73 percent, to 16,311, with Boeing leading decliners and United Technologies the top gainer.
The S&P 500 (^GSPC) declined 11 points, or 0.58 percent, to 1,910, with financials leading nine sectors lower and telecommunications the only decliner.
The Nasdaq (^IXIC) composite fell 11 points, or 0.27 percent, to 4,491.
The Dow transports came off session lows to trade about 1.5 percent lower, with Avis Budget (CAR) plunging more than 20 percent to lead decliners.
About four stocks declined for every three advancers on the New York Stock Exchange, with an exchange volume of 559 million and a composite volume of nearly 2.649 billion.
Crude oil futures for April delivery dipped 4 cents to $31.83 a barrel on the New York Mercantile Exchange. Gold futures for April delivery settled at $1,239.10 an ounce, up $16.50.
—CNBC’s Fred Imbert contributed to this report
On tap this week:
Earnings: HP, L Brands, NetEase, Salesforce.com, Transocean
7 p.m. St. Louis Fed President James Bullard
G-20 finance ministers meet in Shanghai
Earnings: AB InBev, Bayer, Apache, Best Buy, Campbell Soup, Domino’s Pizza, Kohl’s, Chico’s FAS, Sears Holdings, SeaWorld, Baidu, Autodesk, Gap, Intuit, Kraft Heinz, Herbalife, Live Nation Ent., Noodles & Co., Weight Watchers
8:15 a.m. Atlanta Fed President Dennis Lockhart
8:30 a.m. Initial claims; durable goods
9 a.m. FHFA home prices
10:30 a.m.: Natural gas inventories
11 a.m.: Kansas City Fed Manufacturing Index
12 p.m. San Francisco Fed President John Williams
1 p.m. $28 billion seven-year notes
G-20 meets in Shanghai
Earnings: J.C. Penney, Foot Locker, Sotheby’s, Sempra Energy, AmericanTower, Centerpoint, Liberty Media, Telefonica, Rowan Cos
8:30 a.m. Real GDP Q4 (second reading); international trade
8:30 a.m.: Personal income, consumer spending
10 a.m. Consumer sentiment
Earnings: Berkshire Hathaway
*Planner subject to change.
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