Stock Market Today: Energy Stocks Pop as Geopolitical Risks Rise

picture of oil rig in ocean with stock chart superimposed over it

(Image credit: Getty Images)

published 19 December 2023

Stocks opened higher Tuesday and stayed there through the close as investors took in surging oil prices and upbeat economic data.

At Tuesday's finish, the Dow Jones Industrial Average was up 0.7% at 37,557 – a new record close – the S&P 500 was 0.6% higher at 4,768, and the Nasdaq Composite had gained 0.7% at 15,003.

All of the 11 main S&P 500 sectors closed higher. Energy stocks led the way, gaining 1.2% as U.S crude futures popped 1.3% to $73.44 per barrel.

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"Trouble in the Middle East is pushing up the price of oil, with Tehran-backed Houthi rebels from Yemen attacking commercial vessels in the Red Sea," says José Torres, senior economist at Interactive Brokers. "Around 10% of global trade goes through the Red Sea towards the Suez Canal, while 40% of goods moved between Europe and Asia are transported through the route."

An alternative route does exist for these companies around the southern tip of Africa – and many shippers are exploring this option – but it's much longer and more expensive, Torres adds.

Housing starts jump in November

It was a relatively light day for economic data, with housing starts and building permits the lone report on the docket. Construction on new homes jumped 14.3% from October to November to 1.56 million, according to the Census Bureau. Building permits, which are an indicator of future construction, were up 2.5% month-over-month in November.

"Easing mortgage rates and a dearth of inventory of existing homes have prompted homebuilders to ramp up construction," says Jay Hawkins , senior economist at BMO Capital Markets.

With housing starts back to pre-pandemic levels, the drag on gross domestic product (GDP) from weak residential investment is starting to fade, Hawkins adds. However, "it will take some time to balance supply and demand and improve affordability," the economist says.

Affirm stock sizzles on expanded Walmart partnership

In single-stock news, Alphabet (GOOGL) rose 0.6% despite newly released court documents revealing the tech giant in September agreed to pay $700 million to settle antitrust allegations against its Android app store. The settlement is ultimately immaterial for Alphabet, which had $120 billion in cash and short-term investments on its balance sheet as of September 30.

Elsewhere, Affirm (AFRM) shot up 15.5% on news Walmart (WMT, +0.4%) will expand its buy-now-pay-later (BNPL) options to include purchases at the discount retailer's self-checkout kiosks.

"Expanding our partnership with Walmart and bringing Affirm's transparent monthly pay-over-time options to their self-checkout kiosks in the U.S. will help even more consumers increase their purchasing power during the holiday shopping season and beyond," said Pat Suh, Affirm's senior vice president of revenue, in a press release.

AFRM shares had a rough 2022, losing 90% of their value. However, the BNPL stock has put in a convincing rebound in 2023, having more than quintupled so far this year.

Be advised that AFRM's soaring share price has the stock trading at a lofty valuation by some measures. Such concerns prompted Morgan Stanley analyst James Faucette on Monday to downgrade Affirm to Underweight from Equal Weight, the equivalents of Sell and Hold, respectively.

"While we believe Affirm is executing well amid its goal of becoming a more meaningful player in the payments landscape, we believe the market has gotten ahead of itself," Faucette wrote in a note to clients.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.