US open: Stocks edge higher; Best Buy surges on Q2 results

US stocks rose on Tuesday despite continued weakness in oil markets, as investors cheered earnings from Best Buy and Toll Brothers, as well as a strong reading on new home sales.

At 1510 BST, the Dow Jones Industrial Average was up 0.4%, the S&P 500 was 0.5% firmer and the Nasdaq was up 0.5%.

At the same time, oil prices remained under pressure as hopes of a production freeze faded and amid reports that Iraq – OPEC’s second-biggest producer – was set to ramp up its exports. West Texas Intermediate was down 3% at $47.05 per barrel and Brent crude was 1.2% lower at $48.57.

Goldman Sachs stuck to its forecasts that oil would remain at $45-$50 a barrel through next summer. “We reiterate our view that the oil price and fundamental recovery remains fragile,” the bank said.

Goldman said that while oil prices have rebounded sharply since the beginning of this month, the upward move was driven by better oil fundamentals but rather by headlines around a potential output freeze and a weaker dollar.

Some well-received corporate news helped to underpin the tone, with Best Buy sharply higher after the consumer electronics retailer’s second-quarter results beat expectations.

Housebuilder Toll Brothers rallied after posting a 58% rise in third-quarter profit.

Wells Fargo nudged up despite news that the Consumer Financial Protection Bureau has fined the bank $3.6m for illegal student loan servicing.

On the downside, restaurant chain Zoe’s Kitchen tumbled after it said late on Monday that it was cutting its guidance for the fiscal year.

Sophiris Bio shares tanked after the biopharmaceutical firm priced a public offering of 6.5m shares at $4.00 per share - a 31% discount to Monday's closing price.

On the macroeconomic front, investors digested weaker than expected data on US manufacturing sector activity, but encouraging new home sales.

Markit’s flash US manufacturing purchasing managers’ index fell to 52.1 in August from a nine-month high of 52.9 in July.

Economists had been expecting a less steep decline to 52.7. A reading above 50 indicates expansion.

Although the PMI has now pointed to improving business conditions in each month since October 2009, August’s reading pointed to a moderate rate of improvement that was weaker than the post-crisis average.

New home sales figures were much more upbeat, rising 12.4% to an annualised pace of 654,000 units in July, versus economists’ expectations for a 2% drop.

Meanwhile, investors continued to look ahead to Federal Reserve Chair Janet Yellen’s speech at Jackson Hole on Friday in the hope she will provide further clues on the timing of an interest rate hike.

Oanda’s Craig Erlam said: “Yellen’s speech on Friday remains the headline event this week and I think we could continue to see an element of caution in the markets in the lead up to this. Investors are still not buying a 2016 rate hike, even following Stanley Fischer’s comments over the weekend regarding the economy – markets now marginally pricing in February - so the probability that Yellen says something that goes against what’s priced in seems quite high."