Stocks Rally, Boosted by Crude Oil Price Surge

U.S. stocks rallied on Monday, helped by a more than 2 percent surge in crude oil futures, as investors prepared for two central bank meetings later in the week. The lack of fresh economic data turned the focus on commodity markets and the U.S. Dollar. Commodity markets were generally stronger across the board and the dollar was weaker.

Dow Jones Industrial Average futures were up more than 100 points, the S&P 500 up about 0.44 percent and the NASDAQ Composite gained 0.32 percent. The NASDAQ-100 reached a new all-time intraday high. The Dow and S&P 500 were primary supported by strength in the energy sector. The NASDAQ firmed as investors continued to prop up technology stocks.

All eyes are focused on the U.S. Federal Reserve and Bank of Japan policy decisions scheduled for Wednesday. According to the CME Group’s FedWatch Tool, there is about a 12 percent chance the Fed will raise rates. Traders have pegged the chances of a December rate hike at 50 percent.

Those looking for a December rate hike are hoping the Fed delivers a “hawkish” tone in its statement. The general feeling is that if Fed Chair Janet Yellen wants to guide the market for a rate hike later this year, she’s going to have to be more specific in her assessment of the economy, rather than just saying the decision will be data dependent.

The BOJ is expected to be more aggressive than the Fed. There is speculation the central bank may take interest rates deeper into negative territory. There is some controversy over this possible decision, however. Many traders feel that since lowering rates into negative territory in January hasn’t worked then why do it again?

The U.S. Dollar weakened after Friday’s strong surge encouraged investors to take profits. The rally at the end of last week was fueled by stronger-than-expected consumer inflation data. However, the data isn’t expected to be strong enough to sway the Fed at the September meeting. The weaker dollar helped underpin gold futures, but gains were capped by the rally in the stock market. The Euro and the British Pound were also supported by the lower dollar.

Crude oil prices rallied over 2 percent on Monday after Venezuela President Nicolas Maduro said that a deal could be announced later this month to stabilize oil markets.

In U.S. economic news, the September 2016 US NAHB housing market index came in at 65, higher than the expected 60. The prior was revised upward to 60 from 59. Single home sales were 71 versus 65. Overall, the data shows that housing is still below pre-crisis levels, but there is nothing to indicate emerging selling pressure. The Fed is likely to acknowledge the strength of the housing market and that the trend is likely to continue.