Stocks swung from early session losses Thursday to close slightly higher for a third day of gains, with energy shares maintaining gains after a rebound by oil futures fizzled and a flurry of economic data pointed to continued lackluster U.S. growth.
The S&P 500 /quotes/zigman/3870025/realtime SPX +0.29% rose 6.95 points, or 0.4%, to close at 1,993.40, near their session high. The energy sector advanced the most, rising 1.3%, while two of the S&P 500’s 10 sectors were in negative territory, led by a 0.4% drop in health-care stocks.
The Dow Jones Industrial Average /quotes/zigman/627449/realtime DJIA +0.64% rose 44.58 points, or 0.3%, to settle at 16,943.90, just below its session high, led by a 3.4% rally in shares of Caterpillar Inc. /quotes/zigman/221644/composite CAT +1.47%
The tech-heavy Nasdaq Composite /quotes/zigman/12633936/realtime COMP +0.41% gained 4 points, or 0.1%, to finish at 4,707.42.
Thursday’s move higher follows two days of gains by stocks that were fueled by a jump in the energy sector following sharp gains in crude. As oil prices /quotes/zigman/104967144/delayed CLJ6 0.00% tumbled early Thursday, stocks also weakened, in keeping with a recent trend of strong correlation between stock and oil prices. A late-morning rebound in oil helped stock benchmarks erase losses, but oil ended the day lower.
The energy sector bucked weakness in oil futures, led by a 26% jump by shares of Chesapeake Energy Corp. /quotes/zigman/126832/composite CHK +2.82% , an 18% gain in shares of Southwestern Energy Co. /quotes/zigman/241523/composite SWN +1.04% , and a 14% rise in shares of global drilling company Ensco PLC /quotes/zigman/10189842/composite ESV +0.11% .
After a dismal earnings season for oil and gas companies, there has recently been “some degree of stabilization in energy shares at these low levels,” which explains Thursday’s bounce, said Bill Northey, chief investment officer at the Private Client Group at U.S. Bank.
However, as long as a supply-and-demand imbalance remains in the oil market, the correlation between oil prices and broader risk assets should remain high, Northey said.
On the economic front, the U.S. service sector grew more slowly in February, the Institute for Supply Management said Thursday. A similar reading from Markit, also out Thursday, showed services in contraction for the first time since October 2013.
Meanwhile, the number of Americans who applied for first-time unemployment benefits rose in the last week of February, ahead of Friday’s closely watched official jobs report. But the productivity of U.S. businesses fell at a slower pace in the fourth quarter than previously estimated.
Factory orders rose 1.6% in January, after two straight monthly declines.
“If you look at the economic data, it was OK, but I think the 300-point rally [on the Dow] we got two days ago is hanging over the market,” said Paul Nolte, portfolio manager at Kingsview Asset Management.
Nolte said investors are reassessing that euphoria in anticipation of the Friday jobs data and how that might affect the Federal Reserve’s policy meeting later this month.