U.S. stocks on track to rally on oil-price gains, dovish Fed comments

Madrid-Spain (Jan 8)   U.S. stock futures pointed to a sharply higher open for Wall Street on Thursday, boosted by dovish comments by a Federal Reserve member and investor hopes that Wednesday’s gains will extend as oil prices continued to creep higher.

Prospects for further central-bank easing in Europe were also whetting investor appetite for riskier assets such as stocks.

Futures for the Dow Jones Industrial Average DJH5, +0.95%  rose 179 points, or 1%, to 17,686, while those for the S&P 500 index SPH5, +0.93%  gained 19.50 points, or 1%, to 2,039.20. Futures for the Nasdaq-100 index NDH5, +1.01%  jumped 42 points, or 1%, to 4,193.50.

Wall Street stocks recorded the first gain of 2015 on Wednesday as they snapped a five-session losing streak. Firmer oil prices helped, but the move was also driven by the view that markets had sold off too much in recent sessions, encouraging buyers to wade in.

Global markets also rallied Thursday. U.S. oil prices for February delivery CLG5, +0.62%  zig-zagged, tapping nearly $50 a barrel at times and those for Brent crude LCOH5, +0.59%  were atop $51 a barrel.

Also read: Here’s what it will take for oil prices to find a floor

Will stock gains stick?  Federal Reserve Bank of Chicago President Charles Evans said the U.S. might not hit the Fed’s target inflation rate until 2018, and he doesn’t advise a rate hike until 2016. Evans, who is a voting member of the Federal Open Market Committee, was speaking at an event sponsored by the University of Chicago late Wednesday.

Those comments lit a fire under futures overnight, Stephen Guilfoyle, chief economist at Sarge986.com, said in a note. “Fed speak, it’s a beautiful thing,” Guilfoyle said.

As for whether Wednesday’s 1.2% gain for the S&P 500 SPX, +1.16% has staying power, investors may want to look at which sectors performed well, said Michael O’Rourke, chief market strategist at JonesTrading. He noted gains were led by consumer staples and health care — largely biotechs and pharma.

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“Traditionally, these are defensive groups which prompts one to wonder if investors are taking a conservative approach to participating in this rally,” O’Rourke wrote in a note. “The problem is the valuations in these sectors are hardly defensive.”

Source: MarketWatch