U.S. stocks rise before Federal Reserve meeting; oil rebounds

Marley Jay, The Associated Press</span>
Published Wednesday, December 19, 2018 12:02AM EST
Last Updated Wednesday, December 19, 2018 10:27AM EST

NEW YORK -- U.S. stocks are climbing Wednesday morning as a modest recovery in oil prices pulls energy companies slightly higher following huge losses a day earlier.

Markets were relatively quiet as the Federal Reserve wraps up its last meeting of the year. Investors expect the Fed to raise interest rates again, and are looking for details about its plans for 2019 amid signs the global economy is slowing down.

KEEPING SCORE: The S&P 500 index rose 16 points, or 0.7 per cent, to 2,562 as of 10 a.m. Eastern time. The Dow Jones Industrial Average added 131 points, or 0.6 per cent, to 23,806. The Nasdaq composite gained 57 points, or 0.9 per cent, to 6,841. The Russell 2000 index, made up of smaller-company stocks, picked up 8 points, or 0.6 per cent, to 1,385.

FED FOCUS: The Fed will likely raise its short-term interest rate another quarter-point, to a range of 2.25 per cent to 2.5 per cent. The central bank has forecast three more hikes in 2019, but with investors worried about slowing economic growth and the financial markets slumping, experts expect the Fed to predict a slower path of increases next year. For stock markets, battered recently by a series of concerns related to mounting trade tensions between the U.S. and China, that could be cause for optimism.

The Fed's rates help set lending rates around the U.S., and higher rates tend to slow down economic growth because they make it more expensive for businesses and consumers to borrow money. The Fed's actions are part of a trend around the world, as other major central banks are either reducing their economic stimulus plans or raising rates. The global economy is already forecast to slow down in 2019 and investors are getting nervous rising rates will make it worse.

MEDICINE CABINET MERGER: Drugmakers GlaxoSmithKline and Pfizer said they will combine their consumer product businesses, bringing Pfizer's Advil pain medicine and Centrum supplements together with Glaxo's Sensodyne toothpaste. The companies said its combined sales will be more than $12 billion. GlaxoSmithKline of Britian will own two-thirds of the combined company. Its stock jumped 3.8 per cent to $38.49 while Pfizer slipped 0.4 per cent to $42.22.

LOST IN THE MAIL: FedEx said international shipping, especially in Europe, fell in its latest quarter, while the U.S.-China trade dispute is also affecting its business. The shipping company posted a smaller profit than analysts expected and said it will cut spending and offer buyouts to some workers to help make up for the shaky results.

"The peak for global economic growth now appears to be behind us," Chief Marketing Officer Rajesh Subramanian said in a conference call with investors.

FedEx stock lost 9.2 per cent to $168.03 and rival UPS skidded 1.3 per cent to $96.04. FedEx has tumbled by about 33 per cent this year, and UPS is down 19 per cent.

ENERGY: Oil prices bounced back slightly after plunging on worries about rising supplies and weakening global growth, which could weigh on demand. Benchmark U.S. crude climbed 1.9 per cent to $47.12 a barrel in New York. It dropped 7 per cent Tuesday and closed at a 16-month low, and has fallen almost 40 per cent since Oct. 3. Brent crude, used to price international oils, was up 1.3 per cent to $56.97 a barrel in London.

EUROPE: European stocks rose after Italy's government reached an agreement with the European Commission on its budget plans. That avoids a legal dispute over the government's plan to ramp up spending. The Italian FTSE MIB jumped 1.4 per cent. Germany's DAX added 0.5 per cent while the CAC 40 in France rose 0.4 per cent. The British FTSE100 gained 0.7 per cent.

CONTACT HIGH: Canadian marijuana grower Tilray rose another 4.9 per cent to $80.25. The stock rocketed 16 per cent Tuesday after the company announced that one of its subsidiaries will work with drugmaker Sandoz to collaborate on medical cannabis products and some non-smokable products as well. Tilray has products available in 12 countries and operations in Australia, New Zealand, Canada, Germany, Latin America and Portugal.

Tilray went public at $17 a share in July and peaked $300 a share in September as it and other marijuana shares made explosive gains. Despite enormous volatility, Tilray nad many of its combpetitors have made big gains this year.

BONDS: Bond prices edged higher. The yield on the 2-year Treasury note fell to 2.65 per cent from 2.66 per cent, and the yield on the 10-year note fell to 2.81 per cent from 2.82 per cent.

ASIA: Japan's Nikkei 225 index fell 0.6 per cent and while South Korea's Kospi rose 0.8 per cent. Hong Kong's Hang Seng was 0.2 per cent higher.

CURRENCIES: The dollar slipped to 112.19 yen from 112.53 yen. The euro rose to $1.1429 from $1.1357 and the British pound rose to $1.2667 from $1.2639.

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