By Mike Bird
The Dow Jones Industrial Average climbed with oil prices on Tuesday, the first major trading day of the new year.
U.S. stocks capped off 2016 with their best performance in years, with the blue-chip index rising double-digit percentages to log its biggest gain since 2013. Many analysts and investors expect the stock market rally to continue, citing a rebound in corporate earnings, acceleration of U.S. economic growth and prospects of tax cuts and fiscal stimulus under the new administration.
"We ended the year with nothing to dampen the optimism about the 2017economic outlook," said Kit Juckes, global head of foreign-exchange strategy Société Générale SA.
On Tuesday, the blue-chip index climbed 67 points, or 0.3%, to 19830, after slipping in the last trading session of 2016. The S&P 500 added 0.6%, boosted by shares of energy and financial companies, and the Nasdaq Composite rose 0.7%.
Energy shares led the rally, rising 1.3% in the S&P 500. Marathon Petroleum, Transocean and Murphy Oil Corporation each gained more than 4%.
The energy sector was given a boost by U.S. crude oil, which rose 0.9% to $54.20 a barrel as investors bet that production cuts set to begin this month would help drain global stockpiles.
The Organization of the Petroleum Exporting Countries and other oil producing countries including Russia agreed late last year to cut output by 1.8 million barrels a day or around 2% of global production in 2017. While oil prices have climbed in the double-digit percentages since the Nov. 30 deal, many analysts remain skeptical that the producers will stick to the terms of their agreement.
Meanwhile, financials -- one of the best-performing sectors in the S&P 500 in 2016 -- climbed Tuesday.
Bank stocks have surged since the election, bolstered by the prospect of higher rates, as well as looser regulations under President-elect Donald Trump.
On Tuesday, the S&P 500 financial sector rose 0.5%, with Morgan Stanley, Citigroup and Capital One Financial Corporation among the biggest gainers.
While stocks rallied, developed government bonds continued their slide, with the yield on the U.S. 10-year Treasury note climbing to 2.481% Tuesday from 2.446% previously, according to Tradeweb. Yields rise as bond prices fall.
Expectations of inflation and faster economic growth have pressured long-term government bonds, as they erode the value of their fixed returns.
Elsewhere, the Stoxx Europe600 index rose 0.6%, led by banks and oil and gas companies.
Shares in Asia closed higher, with Hong Kong's Hang Seng climbing 0.7% and South Korea's Kospi index up 0.9%. Japan's Nikkei 225 was closed for a holiday.
Akane Otani contributed to this article
Write to Mike Bird at Mike.Bird@wsj.com
(END) Dow Jones Newswires
January 03, 2017 11:34 ET (16:34 GMT)
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