Stocks extend rally after latest Fed minutes

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Stocks traded higher Wednesday, trying for a three-day win streak, helped by a rise in oil prices and some encouraging economic data.

Stocks topped earlier session highs after the minutes from the latest Federal Reserve meeting showed policymakers worried last month that tighter global financial conditions could hit the U.S. economy and considered changing their planned path of interest rate hikes in 2016.

The “market is thinking the Fed is going to be more supportive and cognizant of emerging market slowdown,” said Krishna Memani, chief investment officer at Oppenheimer Funds.

The S&P 500 topped the psychologically key 1,900 level in intraday trade for the first time since Feb. 5 and came within 10 percent of its 52-week intraday high, out of correction territory on an intraday basis. Energy led advancers.

“I think the economic statistics probably took over more than anything. When the markets were coming down there was a big fear of recession,” said Ben Pace, chief investment officer at HPM Partners. The recent data shows “we might be slow from an economic perspective but we’re not close to a recession.”

“I think stocks are rallying on economic fundamentals and the fact that oil is up,” he said.

U.S. crude oil futures surged more than 5.3 percent to near $30.60 a barrel after comments from the Iran oil minister raised hopes for the possibility of cooperation on an agreement to freeze production.

Luana Siegfried, energy research associate at Raymond James, was skeptical of the likelihood of a deal. “So far it’s more trading on news than any specific fact,” she said, also attributing the gains in oil to a rebound from Tuesday’s decline.

Iran Oil Minister Bijan Zanganeh said he supports any effort to stabilize the market and prices, according to a Reuters report citing the Iranian oil ministry’s official Shana news agency. The Iran oil minister also said in the report the Tehran oil producers meeting was good.

Zanganeh did not explicitly say in his remarks quoted by Shana that Iran would keep its own output at its January level.

“You have the credible possibility for progress that finally makes sense,” said Art Hogan, chief market strategist at Wunderlich Securities.

“The narrative continues to get louder and more believers in a commodity complex that was leaning in the wrong direction to begin with,” he said.

The Dow held more than 250 points higher in afternoon trade, with Boeing, IBM and Chevron the top contributors to gains. The Dow transports gained more than 1 percent.

The Nasdaq composite outperformed, briefly rising 2 percent as Priceline surged more than 10 percent. The travel website operator reported a higher-than-expected quarterly profit after hotel and rental car bookings rose, with travel demand suffering only briefly from the Nov. 13 Paris attacks, Reuters said. Major tech stocks and biotechs also traded higher.

John Caruso, senior market strategist at RJO Futures, said some of the gains could be “front-running a dovish FOMC minutes” as well as positive reaction to industrial production and inflation data.

However, he attributed most of the mid-morning rally to a short squeeze. “I do believe this rally is going to run out of steam pretty soon. We have got some irrational exuberance going on over here,” he said.

In economic news, industrial production for January rose 0.9 percent, while capacity utilization was 77.1 percent.

“I think the recent macro indicators we have received have been sufficiently positive to provide a lift to equities for now,” John Lonski, chief economist at Moody’s, said, noting Friday’s better-than-expected retail sales and Wednesday’s industrial production report.

“We have indications that U.S. spending will provide sufficient buoyancy to corporate revenues and profitability in 2016,” he said. “Nevertheless, the performance by both categories will be below average for an economic recovery.”

U.S. producer prices unexpectedly rose last month, rising 0.1 percent after falling 0.2 percent in December. Excluding food and energy, PPI rose 0.4 percent.

Housing starts fell 3.8 percent in January, while building permits fell 0.2 percent.

St. Louis Fed President James Bullard is due to speak after the market close.

Treasury yields edged higher after the data, with the 2-year yield at 0.75 percent and the 10-year yield at 1.83 percent as of 12:05 p.m. ET.

The U.S. dollar index reversed to trade mildly lower against major world currencies, with the euro at $1.115 and the yen at 114.20 yen against the greenback.

As of intraday trade Wednesday, the Dow Jones industrial average and S&P 500 were on track for their first three-day win streak of 2016.

“The S&P futures are seeing positive follow-through this morning after a strong close yesterday,” BTIG Chief Technical Strategist Katie Stockton said in a note. “The oversold bounce is supported by short-term positive divergences in our most sensitive momentum indicators. We expect the rally to persist into next week, but we would use it to take down exposure to stocks that have broken down.”

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded below 23.

About five stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 602 million and a composite volume of nearly 2.9 billion in afternoon trade.

Gold futures for April delivery gained $1.90 to $1,210.20 an ounce as of 1:16 p.m. ET.

Evelyn Cheng

Reuters contributed to this report.

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