Stocks Gain as Crude Rises, Inflation Data Supports Interest Rate Increase

Stocks rose on Tuesday as higher crude oil prices and bullish inflation data carried the Dow Jones Industrial up by almost 200 points and pushed the Nasdaq Composite Index above its 5,000-point threshold.

All 10 sectors of the Standard & Poor's 500 rose, led by gains for the energy and financial sectors. Banking stocks appreciated on expectations that the Federal Reserve will raise U.S. interest rates tomorrow for the first time in nearly a decade.

Economic data were supportive of higher interest rates, with the annual consumer price index last month reaching the Fed's 2% target rate for the first time in more than three years. Excluding food and fuel, consumer prices rose 0.2% during November, on par with analyst forecasts.

The Empire State manufacturing index improved to a negative 4.59 reading from a negative 10.74, beating the consensus view looking for a negative 7.0 reading this month. Readings of less than zero indicate contraction, where the index has lingered for five months.

The homebuilders' housing market index dropped a point this month to 61 from November's 62, missing expectations for an 1-point increase to 63.

Equity markets across Europe all finished significantly higher Tuesday, with France and Germany outperforming following gains in oil, commodity and banking stocks. EU-zone economic data beat expectations, with the ZEW index measuring current economic conditions and sentiment rising during December.

West Texas Intermediate crude oil, the U.S. benchmark, bounced from the lowest price in more than seven years on Monday, gaining $0.85 to $37.16 a barrel.

Natural gas fell $0.07 to $1.95 per million BTUs as warm weather reduces demand. Gold was down $2.50 to $1,060.90 per ounce, while silver was down a penny to $13.69 per ounce. Copper was down $0.06 to $2.06 per pound.

Among energy ETFs, the United States Oil Fund gained 2.2% to $11.41, while the United States Natural Gas Fund dropped 3.5% to $7.15. Among precious-metal funds, the Market Vectors Gold Miners ETF was up 0.4% to $13.61 while SPDR Gold Shares were down 0.2% to $101.61. The iShares Silver Trust was up 0.1% to $13.08.

Lumber Liquidators ( LL ) was among the big winners Tuesday, jumping 25% after hedge fund manager Whitney Tilson covered his $2.3 million short position. Valeant Pharmaceuticals gained 17% in midday trading after announcing a deal with Walgreens Boots Alliance ( WBA ).

Neothetics ( NEOT ), a pharmaceutical company, lost 80% of its value after its LIPO-202 phase 3 trial failed to meet co-primary composite and secondary endpoints. Kennametal, a tooling and industrial materials firm, lost 14% after lowering its earnings and revenue guidance for 2016.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 All rights reserved. Unauthorized reproduction is strictly prohibited.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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