Oil rally lifts Wall Street, extending tight correlation
By Rodrigo Campos
(Reuters) - U.S. stocks rose in low volume on Wednesday, led once more by the direction of the price of oil and energy sector shares.
Crude oil and U.S. equity prices have been linked for much of 2016 to a degree that has surprised many investors. Wednesday's market action extended that trend, with WTI crude <CLc1> rising nearly 5 percent and the S&P 500 energy sector <.SPNY> up 1.5 percent. Chevron <CVX.N> jumped 4.6 percent to $92.82 and gave the biggest boost to the energy sector.
"It's not about oil being a barometer of the global economy," said Art Hogan, chief market strategist at Wunderlich Securities in New York. "A lot of it has to do with psychology."
U.S. crude and the S&P 500 have been directionally correlated on all but six trading days this year, according to Wunderlich data.
"Stability in that asset class (oil) for a period of time will allow for the correlation to break down," said Hogan.
Since Feb. 11, the S&P 500 has gained 8.8 percent, but it is still down 2.7 percent for the year.
The Dow Jones industrial average <.DJI> rose 36.26 points, or 0.21 percent, to 17,000.36, the S&P 500 <.SPX> gained 10 points, or 0.51 percent, to 1,989.26 and the Nasdaq Composite <.IXIC> added 25.55 points, or 0.55 percent, to 4,674.38.
In a week with a thin economic data calendar, markets will turn to the European Central Bank, which is expected to further ease monetary policy on Thursday.
Biotechnology stocks came under pressure a day after the U.S. government proposed a test program that would lower incentives to use higher-priced drugs when alternative treatments are available.
The Nasdaq Biotechnology sector <.NBI> fell 1.2 percent with Regeneron Pharmaceuticals <REGN.O> down 5.1 percent to $374.75 as the largest decliner on the Nasdaq 100.
Chipotle Mexican Grill <CMG.N> lost 3.4 percent to $506.63. Already reeling from several food-borne illnesses, the company temporarily shut a Massachusetts restaurant after four employees fell sick.
Advancing issues outnumbered declining ones on the NYSE on a 2.3-to-1 ratio while on the Nasdaq a 1.50-to-1 ratio favored advancers.
The S&P 500 posted 27 new 52-week highs and 1 new lows; the Nasdaq recorded 48 new highs and 41 new lows.
About 7.5 billion shares changed hands in U.S. exchanges, compared with the average 8.67 billion in the previous 20 sessions.
(Reporting by Rodrigo Campos; Editing by Nick Zieminski)
