Energy companies powered to big gains Wednesday, leading the broader stock market higher, on reports that OPEC nations were moving closer to an agreement to cut oil production.
Stocks switched between gains and losses for most of the day, and most industries did not move much. Energy companies surged at 2 p.m. Eastern time on reports that a deal was close. A two-year slump in oil prices has decimated profits at energy companies. The energy sector made its biggest gain since January.
After stock trading closed, OPEC said it had reached a preliminary deal to reduce production for the first time in eight years.
“It just creates a lot of optimism that the worst is over for investors,” said Brian Youngberg, energy analyst at Edward Jones.
The Dow Jones industrial average rose 110.94 points, or 0.6 percent, to 18,339.24. The Standard & Poor’s 500 index added 11.44 points, or 0.5 percent, to 2,171.37. The Nasdaq composite edged up 12.84 points, or 0.2 percent, to 5,138.55.
A little more than two years ago, a barrel of oil cost around $100. But a huge supply glut built up as the U.S. and other countries produced more and more oil and the global economy slowed, which hurt demand. Oil hit a low of $26 a barrel in February and has traded between $40 a $50 a barrel since April, but investors doubt the price will rise further without limits on production. OPEC produces more than a third of the world’s oil.
Benchmark U.S. crude jumped $2.38, or 5.3 percent, to $47.05 a barrel in New York. Brent crude, the international standard, rose $2.72, or 5.9 percent, to $48.69 a barrel in London.
Oil prices jumped 3 percent Monday and then fell 3 percent Tuesday as hopes for a production deal rose and fell, and oil repeatedly changed course Wednesday as well.
Mining and industrial companies also climbed. The Dow was aided by a big gain for heavy machinery maker Caterpillar, which climbed $3.71, or 4.5 percent, to $86.59.
Phone companies suffered some of the largest declines. AT&T fell 61 cents, or 1.5 percent, to $40.85 after a UBS analyst downgraded the company to “Neutral” from “Buy.” Analyst John Hodulik said profits will get squeezed as trade-in deals are offered to try to win customers. He cut his profit forecast for Verizon, which lost 43 cents to $52.06.
AT&T has climbed 19 percent this year and Verizon has risen 13 percent as investors sought stocks that pay big dividends while bond yields remain low.
Mattress maker Tempur Sealy International tumbled after the company said third-quarter sales aren’t meeting its expectations. It cut its guidance and said it expects revenue to fall as much as 3 percent this year. That suggests sales of no more than $3.12 billion, while FactSet says analysts expected $3.23 billion on average. Tempur Sealy stock dropped $16.68, or 22.4 percent, to $57.77.
Deutsche Bank traded higher after the German bank said it will sell a life insurance subsidiary and emphasized it is not seeking government aid. The company is selling its Abby Life unit to Phoenix Life Holdings for about $1.2 billion. Investors have been worrying about Deutsche Bank’s ability to pay a $14 billion claim from the U.S. government. Its U.S.-listed stock, which is down by half this year, rose 38 cents, or 3.2 percent, to $12.30 Wednesday.