US open: Stocks rise as oil prices rally

US stocks advanced on Wednesday as oil prices rose after data showed a drop in crude inventories to ease the global supply glut.

At 1553 BST the Dow Jones Industrial Average climbed 0.87%, the S&P 500 increased 0.70% and the Nasdaq grew 0.62%.

Oil prices were nearing the $50 a barrel mark after government data showed US weekly crude inventories fell more than expected last week. The Energy Information Administration said inventories fell 4.2 million barrels per day to 537.1 million barrels in the week to 20 May, compared to analysts’ forecasts for a decline of 2 million barrels.

The report followed data from the American Petroleum Institute showing US crude stocks dropped by 5.1m barrels last week.

West Texas Intermediate rose 0.28% to $48.76 per barrel and Brent edged up 0.75% to $48.98 per barrel at 1601 BST.

Meanwhile, the Federal Housing Finance Agency revealed US house prices rose more than expected in March. The home price index was 0.7%, compared to forecasts of 0.4% and the previous month’s 0.5%.

The US trade deficit on goods increased from $57.1bn in March to $57.5bn in April, according to the Department of Commerce. However, it was less than the $60bn shortfall which markets had been expecting.

Activity in the US services sector unexpectedly deteriorated in May, according to data released on Wednesday.

Markit’s flash US services purchasing managers’ index fell to 51.2 from 52.8 in April, missing expectations for a reading of 53.1. Although it remained above the 50.0 mark that separates contraction from expansion, it was well below the long-run survey average of 55.6.

US mortgage applications rose 2.3% in the week to 20 May, compared to a 1% drop the previous week, according to the Mortgage Bankers’ Association.

In company news, Hewlett Packard rose sharply after saying late on Tuesday that it will spin off its enterprise services business and merge it with Computer Sciences Corp.

Technology giant Microsoft was also in the black after announcing that it will axe 1,850 workers from its smartphone business.