US close: Stocks rise as oil prices rebound, traders cheer earnings

US stocks climbed on Tuesday as traders hailed earnings from Best Buy and Toll Brothers, and upbeat data on new home sales.

The Dow Jones Industrial Average rose 0.10% to 18,547.30 points, the S&P 500 increased 0.20% to 2,186.90 points and the Nasdaq grew 0.30% to 5,260.08 points.

At the same time, oil prices rebounded from earlier lows after Reuters reported that Iran may be soon willing to negotiate on action to stabilise the market.

"Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others," said a source familiar with Iranian thinking after Venezuelan Oil Minister Eulogio Del Pino's visit to Tehran.

The report comes ahead of next month’s unofficial OPEC meeting.

West Texas Intermediate rose 1.3% to $48.04 per barrel and Brent crude was 1.3% higher at $48.85.

Meanwhile, 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 not 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 edged lower on news that the Consumer Financial Protection Bureau has fined the bank $3.6m for illegal student loan servicing.

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."

Dow Jones - Risers

Nike Inc. (NKE) $59.62 1.63%
Cisco Systems Inc. (CSCO) $30.96 1.08%
Pfizer Inc. (PFE) $35.11 0.77%
E.I. du Pont de Nemours and Co. (DD) $70.43 0.69%
Procter & Gamble Co. (PG) $87.44 0.68%
Home Depot Inc. (HD) $136.25 0.67%
American Express Co. (AXP) $65.79 0.66%
Caterpillar Inc. (CAT) $83.99 0.48%
3M Co. (MMM) $179.82 0.42%
Microsoft Corp. (MSFT) $57.88 0.36%