Oil stocks lead Wall Street higher, US steel soars on buyout deal

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US stock indexes edged higher on Monday, with oil stocks in the lead after mounting attacks in the Red Sea lifted crude prices, while shares of US Steel rocketed after a $14.9 billion buyout deal.

The main Wall Street indexes are looking to end 2023 on a high note as signs of slowing inflation boosted expectations that the US central bank will soon ease its monetary policy.

The blue-chip Dow hit an all-time high for the fourth consecutive session, while the benchmark S&P 500 and the tech-heavy Nasdaq are trading near their highest levels of the year.

Oil majors Chevron climbed 1.5% and Exxon Mobil added 2.0% as crude prices rallied more than 3.5% after attacks by the Houthis on ships in the Red Sea raised concerns of oil supply disruptions.

The S&P 500 energy sub-index climbed 1.9%, leading gains among the 11 major S&P sectors.

Another big gainer was United States Steel, which surged 26.0% to an over12-year high after Japan’s Nippon Steel said it would buy the steelmaker in a $14.9 billion deal including debt.

Investors will focus on economic data this week including the personal consumption expenditure index (PCE) – the Fed’s preferred inflation gauge – weekly jobless claims, housing starts and the final reading of the third-quarter GDP report to gauge the path of US interest rates.

The benchmark S&P 500 marked a seventh straight week of gains on Friday – its longest winning streak since 2017 – fueled by optimism about a Fed policy pivot next year.

Traders are currently pricing in a 70% chance that the Fed will cut interest rates at least by 25 basis points in March, according to CME Group’s Fed Watch tool, even as top Fed policymakers pushed back on the ebullience.

Cleveland Fed President Loretta Mester, a voting member next year, said financial markets had got “a little bit ahead” of the central bank on when to expect interest rate cuts, as per a report.

“There’s still a dislocation between a seemingly dovish pivot that the market is expecting the Federal Reserve to take, and what economists are projecting,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments.

“The direction is the same, it’s just that the velocity of cuts and the magnitude of cuts might not be on the same page.”

At 10:04 a.m. ET, the Dow Jones Industrial Average was up 10.14 points, or 0.03%, at 37,315.30, the S&P 500was up 17.45 points, or 0.37%, at 4,736.64, and the Nasdaq Composite was up 54.51 points, or 0.37%, at 14,868.43.

Goldman Sachs raised its forecast for the S&P 500, which it now sees ending 2024 at 5,100, while decelerating inflation and Fed easing would keep real yields low.

Among other single stocks, Apple slipped 1.3% after more Chinese agencies and state-backed companies asked their staff to not bring iPhones and other foreign devices to work, a report said.

Adobe added 1.6% after the Photoshop maker and Figma agreed to terminate their $20 billion merger announced last year.

VF Corp tumbled 8.5% after the Vans sneaker maker said it was investigating “unauthorised” activity on its computer systems, an incident that was likely to have a material impact on its business.

Advancing issues outnumbered decliners by a 1.65-to-1 ratio on the NYSE and 1.36-to-1 ratio on the Nasdaq.

The S&P index recorded 23 new 52-week highs and two new lows, while the Nasdaq recorded 71 new highs and 46 new lows