U.S. Stocks Rise as Crude Surges Amid OPEC Plan to Cut Output

(Bloomberg) -- U.S. stocks rose, with energy shares rallying the most in eight months, as OPEC agreed to a preliminary deal that will cut production for the first time in eight years.

Oil and gas producers in the S&P 500 Index posted the biggest jump since January as crude futures surged more than 5 percent. Equities had earlier swung between gains and losses as oil prices whipsawed amid optimism for an agreement and mixed data on stockpiles. The afternoon rally in energy overshadowed a 3.8 percent drop in Nike Inc. and AT&T Inc.’s 1.5 percent retreat that dragged down phone companies.

The S&P 500 rose 0.5 percent to 2,171.37 at 4 p.m. in New York, erasing a 0.4 percent slide and closing above its average price during the past 50 days for the first time in almost a week. The gauge also wiped out a monthly decline. The Dow Jones Industrial Average rose 110.94 points, or 0.6 percent, to 18,339.24, with two stocks -- Exxon Mobil Corp. and Chevron Corp. -- contributing more than 40 percent of the gain. The Nasdaq Composite Index added 0.2 percent.

“While the correlation between oil and stocks has loosened, it’s still dictated some trading this week,” said Matt Maley, an equity strategist in New York at Miller Tabak & Co LLC. “We’re about to head back into earnings season, when we’ll see if stocks can get the pick-up the market’s been hoping for.”

OPEC agreed to drop production to a range of 32.5 to 33 million barrels per day, said Iran’s Oil Minister Bijan Namdar Zanganeh, following a meeting in Algiers. While some members of the organization will have to cut output, Iran won’t have to freeze production, he said. Many of the details remain to be worked out and the group won’t decide on targets for each country until its next meeting at the end of November.

Federal Reserve Chair Janet Yellen testified today on bank supervision and regulation while also including remarks on monetary policy. She told lawmakers the U.S. will continue to add jobs at a solid rate, though the recent average pace is probably higher than what’s sustainable over the long term and would eventually cause the economy to overheat. She also said the current course calls for a gradual increase in interest rates, something that doesn’t have a fixed timetable.

Meanwhile, investors are looking for signs that the economy is strengthening and awaiting the next earnings season, which will kick off in about two weeks. A report today showed orders for durable goods were little changed in August, while shipments of capital equipment declined for a fourth month, indicating lingering weakness in manufacturing. A revised reading on second-quarter growth, pending home sales as well as measures of personal income and spending are due later this week.

In addition to eking out a gain for the month, the S&P 500 is also now on pace for a third weekly increase, which would be the most since July. The CBOE Volatility Index fell 5.4 percent today to 12.39, extending its two-day decline to almost 15 percent after an 18 percent jump on Monday. The measure of market turbulence known as the VIX is now down almost 8 percent in September, erasing a climb that reached 35 percent two weeks ago.

In Wednesday’s trading, energy companies jumped 4.3 percent as eight of the S&P 500’s 11 main industries advanced. Raw-materials and industrials added more than 0.6 percent. Phone companies dropped 1 percent, after losing as much as 1.6 percent. Utilities fell for a fourth day, while biotechnology shares slipped to weigh on the health-care group. About 7.1 billion shares changed hands on U.S. exchanges, 7.6 percent more than the three-month average.

Leading energy, Exxon Mobil rallied 4.4 percent, the most since February, and Chevron added 3.2 percent. Murphy Oil Corp. and Devon Energy Corp. increased more than 8.3 percent. Nine of the S&P 500’s 10 strongest performers today were energy names. The lone outsider was copper miner Freeport-McMoRan Inc., which gained 6.9 percent.

AT&T fell the most in two weeks after UBS Group AG downgraded the shares to neutral from buy, and lowered its price target to $43 from $46. The firm cited, in part, higher competition in the wireless business. Verizon lost 0.8 percent after declining as much as 1.3 percent.

Nike had its worst session since March, after disappointing futures orders renewed concerns that competitors are crimping the sneaker maker’s growth.

--With assistance from Camila Russo and Oliver Renick To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, John Shipman, Namitha Jagadeesh