By April 1, 2016 Read More →

Oil prices drop due to pessimism over crude supply cap deal

Oil prices down 3.5 per cent Friday morning

Oil prices

Energy and mining companies are struggling as oil prices and precious metal prices drop.  BP photo.

NEW YORK _ U.S. stocks climbed Friday after the government said job growth continued at a strong clip in March. Makers of consumer goods and household products rose, and health care companies rebounded. The solid employment report helped U.S. stocks stay out of a steep global decline.

Early in the day stocks tumbled along with the prices of oil and precious metals, but they recovered in the afternoon and finished at their highest levels of the day. The Labor Department’s monthly jobs report showed that employers added 215,000 jobs last month, a sign the economy isn’t slowing down. Energy companies took big losses. Hotel companies and airlines both tumbled.

The jobs report was a bit stronger than investors expected but was consistent with hiring over the last few years. That shows employers are confident enough to add staff even though overall economic growth has slowed down. More people also looked for work and wages edged higher.

Kate Warne, investment strategist for Edward Jones, said the report shows the U.S. economy is staying on track and growth remains steady in spite of all the stock market turmoil this year.

“That means more spending on everything from housing to McDonald’s,” she said. “It’s one more confirmation that the worries from earlier in the year really weren’t warranted.”

The Dow Jones industrial average rose 107.66 points, or 0.6 per cent, to 17,792.75. The Standard & Poor’s 500 index added 13.04 points, or 0.6 per cent, to 2,072.78. The Nasdaq composite index gained 44.69 points, or 0.9 per cent, to 4,914.54. Stocks haven’t made many sharp moves in recent weeks, but have drifted gradually higher.

Consumer companies rose. Procter & Gamble, which makes Pampers diapers, Tide detergent and Olay beauty products, gained $1.22, or 1.5 per cent, to $83.53. Drugstore chain Walgreens rose $2.46, or 2.9 per cent, to $86.70. Mondelez, the maker of Oreo cookies and Trident gum, added $1.12, or 2.8 per cent, to $41.24.

Energy prices dropped as investors became more pessimistic about the fate of a proposed deal for major oil-producing nations to reduce production. That would help address a gigantic glut in global supplies, which has hurt prices. U.S. crude fell $1.55, or 4 per cent, to $36.79 a barrel in New York. Brent crude, the benchmark for pricing international oils, gave up $1.66, or 4.1 per cent, to $38.67 a barrel in London.

Marathon Oil retreated 70 cents, or 6.3 per cent, to $10.44 and Diamond Offshore Drilling lost 76 cents, or 3.5 per cent, to $20.97.

In an abrupt reversal, a consortium led by Anbang Insurance Group ended its effort to buy Starwood Hotels & Resorts. The group had offered to buy Starwood for $15 billion, which surpassed a $14 billion offer from the competing Marriott chain. The consortium said it withdrew its offer because of market conditions. Starwood had accepted a $14 billion offer from Marriott but said Monday that Anbang’s bid was probably better.

Starwood fell $4.05, or 4.9 per cent, to $79.38 and Marriott lost $4.04, or 5.7 per cent, to $67.14. Starwood and Marriott would become the biggest hotel chain in the world, and competing hotel companies also fell. Hilton shed 51 cents, or 2.3 per cent, to $22.01.

Regeneron Pharmaceuticals made its biggest gain in four years after an eczema drug it is developing with Sanofi met its goals in a late-stage clinical trial. The stock surged $44.81, or 12.4 per cent, to $405.25, leading a recovery in drugmaking stocks. Biotechnology companies including Amgen and Gilead Sciences also traded higher.

Tesla Motors gained $7.82, or 3.4 per cent, to $237.59 after the electric car company said it received a flood of orders for Model 3, the new, lower-priced vehicle it announced on Thursday. On Twitter, CEO Elon Musk said the company has booked 198,000 orders.

Other automakers fell even though most companies reported strong monthly sales. People keep buying cars and trucks in big numbers, but discounts are jumping. So are sales to rental car companies, which bring in smaller profits. Ford lost 40 cents, or 3 per cent, to $13.10 and General Motors declined 96 cents, or 3.1 per cent, to $30.47.

Airlines fell after an analyst warned that companies may slash their business travel. Michael Linenberg of Deutsche Bank said U.S. corporate profits are getting squeezed, and he downgraded Delta, United Continental, American Airlines and Hawaiian. United Continental dipped $3.14, or 5.2 per cent, to $56.72 and Delta fell $1.67, or 3.4 per cent, to $47.01. American sank $1.49, or 3.6 per cent, to $39.52.

Gold fell $12.10, or 1 per cent, to $1,223.50 an ounce. Silver dropped 42 cents, or 2.7 per cent, to $15.05 an ounce. Copper lost two cents to $2.16 a pound.

Retailer Urban Outfitters disclosed strong sales at its older stores, and the stock added $1.20, or 3.6 per cent, to $34.29. Urban Outfitters is the best-performing stock on the S&P 500 index this year, as its value has climbed 51 per cent.

In other energy trading, wholesale gasoline fell 5 cents, or 3 per cent, to $1.40 a gallon. Heating oil slid 5 cents, or 4.5 per cent, to $1.13 a gallon. Natural gas was little changed at $1.96 per 1,000 cubic feet.

Stocks overseas tumbled. Germany’s DAX lost 1.7 per cent and the CAC-40 in France tumbled 1.4 per cent, and in Britain, the FTSE 100 lost 0.5 per cent. Tokyo’s Nikkei 225 sank 3.6 per cent, while South Korea’s Kospi fell 1.1 per cent. Hong Kong’s Hang Seng index declined 1.3 per cent. Asian markets were hit by weak economic reports from Japan. The nations’ big exporters have been hit by a double whammy of a slowing Chinese economy and a rising yen.

Bond prices didn’t move much. The yield on the 10-year U.S. Treasury note held steady at 1.77 per cent. The dollar fell to 111.73 yen from 112.53 yen, while the euro rose to $1.1392 from $1.1387.

The Canadian Press

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