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U.S. stocks ended higher on Wednesday, with the S&P 500 and Dow registering their biggest daily percentage gains since May 4, as signs emerged of an easing of political turmoil in Italy and a surge in oil prices boosted energy stocks.

Based on the latest available data, The Dow Jones Industrial Average rose 306.47 points, or 1.26 per cent, to 24,667.92, the S&P 500 gained 34.16 points, or 1.27 per cent, to 2,724.02 and the Nasdaq Composite added 65.86 points, or 0.89 per cent, to 7,462.45.

Italy’s 5-Star Movement party made a renewed attempt to form a coalition government and called for eurosceptic economist Paolo Savona to withdraw his candidacy as economy minister.

The Italian government’s successful auction of five- and 10-year bonds also assuaged concerns about the country’s ability to finance itself after a sell-off in Italian bonds on Tuesday resulted in the biggest one-day surge for two-year yields in 26 years.

Fears about instability in Italy had sent investors scurrying to safety assets on Tuesday. U.S. stocks took a beating, with the S&P 500 posting its first 1 percent drop in May, while the U.S. Treasury market had its best day since at least July 2011.

“The market is reversing what appears to be a knee-jerk reaction from yesterday,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta. “As people take a step back, it appears that the sell-off was overdone.”

The Russell 2000 index of small-cap stocks hit an all-time high during Wednesday’s session, buoyed by data confirming the strength of the U.S. economy. Small-cap U.S. companies generally have less international exposure than their large-cap counterparts.

Payroll processor ADP’s monthly report showed U.S. private sector payrolls increased by 178,000 jobs in May. The Commerce Department revised its estimate of first-quarter gross domestic product growth slightly downward but estimated that U.S. GDP growth in the second quarter would rise above 3 per cent annually.

Canada’s main stock index also rose on Wednesday as energy shares gained from a rise in oil prices.

The Toronto Stock Exchange’s S&P/TSX composite index rose 126.05 points, or 0.79 per cent, at 16,048.66.

Energy stocks rose 2.1 per cent. Suncor Energy Corp. and Imperial Oil Ltd. both increased 2.0 per cent, while Encana Corp. was up 3 oer cent.

Lagging shares included Laurentian Bank of Canada, down 4.7 per cent, Alacer Gold Corp, down 3.6 per cent, and Colliers International Group Inc , lower by 2.3 per cent.

The Canadian dollar strengthened against its U.S. counterpart by the most in more than two months on Wednesday after the Bank of Canada left interest rates on hold but boosted expectations for a hike at its next policy meeting in July.

The central bank left its benchmark interest rate at 1.25 per cent, as expected, but dropped cautious language about future rate moves in a signal that higher borrowing costs are on the way.

“The currency strengthened on the less cautious message from the Bank of Canada, which has firmed up expectations for a July rate hike,” said Daniel Katzive, head of FX strategy North America at BNP Paribas.

The Bank of Canada has hiked three times since last summer. Chances of further tightening in July jumped to 64 percent from less than 50 percent before the announcement, the overnight index swaps market indicated.

“We think that continued tightening from the Bank of Canada effectively reinforces the range in USD-CAD, which we expect to be centered around 1.28,” Katzive said.

At 4 p.m. ET,, the Canadian dollar was trading 1.1 percent higher at C$1.2876 to the greenback, or 77.66 U.S. cents, its biggest gain since March 21.

Oil prices climbed surged on Wednesday, rebounding from a four-day slump as Russia’s central bank expressed caution on plans to boost oil supply and analysts forecast a drawdown in U.S. crude inventories.

Brent settled up $2.11, or 2.8 per cent, at $77.50 a barrel. U.S. crude gained $1.48, or 2.2 per cent, to $68.21.

Oil has been pressured by reports that the Organization of the Petroleum Exporting Countries (OPEC) and Russia may ease up on output cuts in place since January 2017. The cuts have driven down global inventories and boosted prices, with global benchmark Brent reaching a 3-1/2-year high of $80.50 a barrel on May 17.

On May 25, sources told Reuters that Saudi Arabia and Russia are discussing raising oil output from OPEC and allied non-OPEC countries by around 1 million bpd.

On Wednesday, however, the Russian central bank said falling oil prices would pose a risk to the country’s financial sector.

“It seems that somebody in the central bank is taking notice of the big drop in oil prices and sending a signal of, ‘Hey, wait a second. We don’t want these prices to fall too far,’” said Phil Flynn, analyst at Price Futures Group in Chicago.

U.S. crude’s discount to Brent rose to as much as $9.31, with Brent supported as investors worried that U.S. sanctions could be cutting crude supplies from Iran.

“There’s more concern on the Brent side that supply losses from Iran are harder to be made up,” Flynn said.

Reuters

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/05/24 4:00pm EDT.

SymbolName% changeLast
IMO-T
Imperial Oil
+1.02%94.44
SU-T
Suncor Energy Inc
-0.16%55.06

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