Wall Street closes higher lifted by energy; Treasury yields rise

US stocks closed higher on Tuesday, adding to the previous session's rally as rising oil prices boosted the energy sector, while US Treasury yields rose on speculation about a possible December Federal Reserve interest rate hike.

After a volatile morning, US stocks settled into positive territory in the afternoon. The Nasdaq 100 index of major companies closed at a record high, driven by technology stocks while the S&P 500 touched its highest since late July.

The Dow Jones industrial average's gain was led by oil company Chevron , while rival Exxon Mobil was one of the biggest drivers for the S&P 500.

 

While energy stocks have risen 22% since late August, the sector is still down 10% year to date.

"I think there has been a real desire on the part of some investors to take advantage of depressed valuations," said Eric Wiegand, senior portfolio manager with US Bank Wealth Management in New York.

But while investors piled into the beaten-down sector, Robert Pavlik, chief market strategist at Boston Private Wealth in New York, questioned whether it would continue to rise.

"You have to be careful with that trade because there doesn't seem to be a dramatic increase in (oil) demand," he said. "I can't see oil dramatically reversing to the upside so I'm participating in it but doing it cautiously."

The Dow Jones industrial average rose 89.39 points, or 0.5%, to 17,918.15, the S&P 500 gained 5.74 points, or 0.27%, to 2,109.79 and the Nasdaq Composite added 17.98 points, or 0.35%, to 5,145.13.

The three top US indexes had already risen around 1% or more on Monday. 

US benchmark > and short-dated Treasury yields hit over six-week highs on continued expectations of a December Fed rate hike. Surging corporate issuance contributed to long-dated yields touching six-week highs.

Speculation about a December hike, the rising bond yields and generally in-line US economic data boosted the dollar. After falling on Monday, the dollar was up 0.3% against a basket of major currencies while the euro > fell 0.5% against the dollar.

US manufacturing in October hit a 2-1/2-year low but a rise in new orders offered hope for a sector buffeted by a strong dollar and relentless spending cuts by energy companies.

Crude oil prices rose almost 4% as a rally in US gasoline and diesel added support to oil markets already boosted by an industry strike in Brazil and force majeure for Libyan crude loadings. 

Brent settled up 3.6% or $1.75 at $50.54 a barrel, while US crude settled up 3.8% or $1.76 at $47.90.

Gold > was down for a fifth straight day at $1,117.56 an ounce, touching its lowest in just over a month, while copper gave back gains from earlier in the day and was roughly in line with where it ended the day before.

Europe's FTSEurofirst ended up 0.4%, after being dogged throughout the trading day by a slump in shares of Volkswagen and Standard Chartered.