CNBC: Rally loses steam as close approaches; Dow halves gains

U.S. stocks advanced in choppy trade Thursday, attempting to shake off pressure from further decline in oil prices, as investors awaited a possible Fed rate hike next week.

“What we really need is to see a market that can trade higher agnostic to oil prices,” said Art Hogan, chief market strategist at Wunderlich Securities.

“Breaking that correlation with WTI … that is a head turner,” he said.

The Dow Jones industrial average traded about 130 points higher after earlier jumping 200 points. Goldman Sachs, Boeing and Chevroncontributed the most to gains. The Nasdaq composite briefly gained more than 1 percent, as Apple and biotech stocks rose.

“You’ve got the market rebounding after a three-day steep sell-off that brought the Dow, S&P and Nasdaq (near) their 200-day moving averages, a perfect area for support,” said Adam Sarhan, CEO of Sarhan Capital.

“In general, when you step back, we’re still range-bound,” he said. The major averages have closed lower for five out of the last six sessions, and are on track for weekly losses of more than 1 percent.

Energy held more than 1 percent higher in afternoon trade after briefly rising rose more than 2 percent to lead S&P 500 advancers. The sector is second to financials as the worst performer in the S&P for the week so far.

The Dow transports rose more than 1 percent with airlines leading advancers.

“I think you’re getting speculation that maybe some of oil is overdone and (investors) start to look for a bargain. The energy space is hit so hard. We’ve been down so much in such a short period of time,” said Robert Pavlik, chief market strategist at Boston Private Wealth. In the longer term, he expects oil to move even lower to around $32 a barrel.

Pavlik also attributed some of Thursday’s gains to money coming back into the market after tax-loss selling.

U.S. crude oil futures settled down 40 cents, or 1.08 percent, at $36.76 a barrel. Earlier, crude it a fresh near-seven-year low of $36.52 a barrel. OPEC said its November production reached a 2009 high, according to Dow Jones.

“In many ways the market is trying to move beyond oil to next week’s event, which is the Fed,” said Dan Farley, regional investment strategist for The Private Client Reserve at U.S. Bank.

“The biggest short-term risk to the market is they don’t raise,” he said.

CME’s FedWatch tool shows markets are pricing in an 85 percent chance of the Federal Reserve raising rates at its meeting next week for the first time in nearly a decade.

The Fed “has been such an anticipated event people are on the edge of their seats for no reason,” said JJ Kinahan, chief strategist at TD Ameritrade. He noted the VIX is up about 30 percent for the week so far, indicating “there’s still a lot of nervousness in the market.”

The VIX edged lower to below 19 in afternoon trade.

Stocks kicked off the session mixed, with the S&P 500 and the Nasdaq composite trading slightly positive, and the Dow Jones industrial average lower. The three major indexes later tried for gains.

Read MoreOPEC predicts rivals’ supply to contract in 2016

On Wednesday, U.S. stocks closed lower in choppy trade as oil prices weighed and as investors tried to position themselves ahead of a possible Fed rate hike. The Dow gave up triple-digit gains and dropped over 150 points at its lows.

“I think we’re seeing a market that is discounting a Fed rate hike … and lower oil prices,” said Peter Cardillo, chief market economist at First Standard Financial. “From a technical perspective, the S&P 500 managed to hold the 2,040 level.”

Investors also digested two economic data sets Thursday morning, with initial jobless claims rising to 282,000. Economists polled by Reuters expected the number to come in at 269,000.

“The level of firings remains muted as in a tight labor market with near 40 year lows in participation employers are holding tight to the employees they have (outside of energy and manufacturing),” Peter Boockvar, chief market analyst at The Lindsey Group, said in a note.

Meanwhile, import prices fell 0.4 percent in November, as oil prices weighed, the Labor Department said.

Other data due Thursday include the Treasury budget at 2 p.m.

Treasury yields held mostly higher, with the 2-year yield at 0.95 percent and the 10-year yield at 2.23 percent in early afternoon trade.

The U.S. dollar recovered from a dip to trade about half a percent higher against major world currencies, with the euro holding above $1.09 and the yen at 121.51 yen against the greenback, as of 1:33 p.m., ET.

In corporate news:

American International Group announced Thursday that four of its top 15 executives will be leaving the insurance company as part of a management restructuring.

Chevron said it plans to cut its budget by 24 percent next year as oil prices are expected to remain low. Reuters notes the dramatic cutback in spending is likely to be echoed by other oil majors who will soon release spending plans, with rival ConocoPhillips set to release its 2016 budget on Thursday.

Glencore said it aims to cut net debt by almost $3 billion to $13 billion by the end of next year, CEO Ivan Glasenberg said. The firm also plans to cut capital spending to $3.8 billion in 2016, down from $5 billion.

Moody’s Investors Service downgraded all ratings for Petrobras to Ba3 from Ba2 and placed them on review for possible further downgrade. Moody’s also put Brazil’s Baa3 rating on review for downgrade.

Read MoreEarly movers: CVX, FB, YUM, NCLH, JCP & more

In afternoon trade, the Dow Jones industrial average rose 105 points, or 0.63 percent, to 17,602, with Chevron leading advancers and DuPontthe greatest decliner.

The S&P 500 gained 8 points, or 0.4 percent, to 2,055, with energy leading eight sectors higher and utilities and materials the only laggards

The Nasdaq traded up 25 points, or 0.5 percent, to 5,047.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 19.

Advancers were slightly ahead of decliners on the New York Stock Exchange, with an exchange volume of 541 million and a composite volume of nearly 2.8 billion.

Gold futures for February delivery settled down $4.50 at $1,072.00 an ounce.

Read MoreThe oil drop in two charts

On tap this week:


2 p.m.: Federal budget

4:30 p.m.: Fed balance sheet/money supply


8:30 a.m. Retail sales; PPI

10 a.m.: Consumer sentiment; business inventories

1 p.m.: Rig count

*Planner subject to change.

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