Stocks Stay Positive as Oil Reaches 15-Month High, Bank Earnings Beat Expectations

Stocks closed modestly higher for a second consecutive day, buoyed by a 15-month high in brent crude oil and positive quarterly earnings from the financial sector.

Oil raced higher mid-morning on the combination of remarks from the Saudi oil minister regarding production cuts and an unexpected drop in inventory levels. As a result, West Texas intermediate gained 2.25% on the futures market, while brent was up 1.7%.

The banking sector got a boost from upbeat earnings from Morgan Stanley (MS) and US Bancorp (USB) making the financial sector the second strongest sector of the S&P 500 following the energy complex.

Wednesday’s economic data had only a modest impact on the markets today. Housing market data was mixed with September housing starts falling 9.0% but permits up 6.3%. The Beige Book showed the economic environment hasn’t changed that much from the previous report, but the indication of wage pressures and tight labor markets resulted in light selling pressure towards the close.

In related markets, gold gained more than $7 to a 10-day high as a result of the weaker dollar while Treasury yields reversed course and were down across the curve with the exception of the 10-year note which cheapened slightly from Wednesday.

The economic calendar on Thursday picks up considerably with the weekly jobless claims data (expected +4K to 250K), the Philadelphia Fed business outlook survey (expected 7.0 from 12.8), September existing home sales (expected +0.3% to SAAR 5.35 mln), and September leading economic indicators (expected +0.2%)

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