Tag Archives: Wall Street

U.S. banks must pay up to $2 billion more per year to shield Wall Street: Fed

A Wall Street sign is pictured outside the New York Stock Exchange in New York,

WASHINGTON (Reuters) – The largest U.S. banks will have to pay as much as $2 billion more a year to insure against a future market collapse, the U.S. Federal Reserve said on Thursday, as it outlined a new rule designed to further protect the financial system.

The rule demands Wall Street holds more debt that could be converted to shareholder equity if a bank is pushed to bankruptcy. Investor-owned stock is the main buffer against a bank failure.

Half of the eight largest U.S. banks would need to issue roughly $50 billion in fresh debt to satisfy the new standard, known as Total Loss Absorbing Capacity (TLAC), according to Fed estimates.

Taken together, the eight banks’ overall annual funding costs are set to increase by between $680 million and $2 billion, the Fed has said.

Fed officials declined to identify the four banks that lack sufficient debt. Wells Fargo Co said in November it envisioned issuing at least an additional $29 billion in debt to satisfy the rule.

Large banks were already making significant strides to satisfy the new rule, Fed officials said.

The final rule issued on Thursday largely upholds a draft issued early this year, but with a few concessions to the industry.

Much existing debt will be counted towards satisfying the new rule, the Fed said, a process known as ‘grandfathering’.

“This grandfathering should significantly reduce the burden of complying with the requirements,” the Fed said in a statement.

Besides Wells Fargo, the banks expected to satisfy the new rule are JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc, State Street Corp, Bank of New York Mellon Corp, Morgan Stanley and Goldman Sachs Group Inc.

Some of the largest subsidiaries of foreign banks must also satisfy TLAC.

(Reporting By Patrick Rucker in Washington; Additional reporting by Dan Freed and David Henry in New York; Editing by Bill Rigby)

U.S. short-term bond yields, dollar gain on Fed rate hike

A trader works on the floor of the New York Stock Exchange (NYSE) as a television screen displays coverage of U.S. Federal Reserve Chairman Janet Yellen shortly after the announcement that the U.S. Federal Reserve will hike interest rates, in New York, U.S.,

By Caroline Valetkevitch

NEW YORK (Reuters) – Yields on shorter-dated Treasuries hit their highest in more than five years on Wednesday while the dollar rallied after the U.S. Federal Reserve raised interest rates as expected and signaled a faster pace of hikes in 2017.

U.S. stocks fell in choppy action, but were off their lows, following the statement from the Fed, which raised the target federal funds rate 25 basis points to between 0.50 percent and 0.75 percent.

Central bank policymakers also shifted their outlook to one of slightly faster growth, with President-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure.

“It was largely as expected, but it’s pretty clear the market is taking it as a bit more aggressive or hawkish than it had thought,” said Ed Keon, portfolio manager and managing director at QMA, the multi-asset manager wholly-owned by Prudential Financial in Newark.

Yields on two-year Treasury notes rose to their highest since August 2009, while three-year yields hit their highest since May 2010 and five-year yields rose to their highest since May 2011.

U.S. two-year notes fell 4/32 in price to yield 1.247 percent.

The dollar index, which measures the greenback against a basket of six major currencies, was last up 1 percent at 102.11. The index had been trading lower while bond yields were also mostly lower before the Fed statement.

In the U.S. stock market, the Dow Jones industrial average fell 41.96 points, or 0.21 percent, to 19,869.25, the S&P 500 lost 7.7 points, or 0.33895 percent, to 2,264.02 and the Nasdaq Composite dropped 0.33 points, or 0.01 percent, to 5,463.49.

MSCI’s all-country world stock index was down 1.1 percent, adding to earlier losses. The pan-European STOXX 600 share index ended down 0.5 percent.

Gold turned lower and tapped the lowest in more than 10 months following the Fed statement, while oil prices fell as the dollar gained.

Spot gold was down 0.3 percent at $1,154.62 an ounce.

Brent crude futures settled at $53.90 per barrel, down $1.82, or 3.27 percent. U.S. crude ended the session down $1.94, or 3.66 percent at $51.04 per barrel.

(Editing by Robin Pomeroy and Nick Zieminski)

Wall Street falls after Fed raises rates; energy weighs

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S.

By Rodrigo Campos

NEW YORK (Reuters) – U.S. stocks fell in volatile trading on Wednesday after the Federal Reserve raised interest rates by a quarter point and signaled hikes could come next year at a faster pace than some expected.

The Fed’s decision comes as President-elect Donald Trump, who will be sworn in next month, is seen cutting taxes and increasing spending on infrastructure. Central bank policymakers shifted their outlook to one of slightly faster growth and lower unemployment.

“The Fed ramped up the pace of rate hikes on a hope and a prayer of faster growth in 2017,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

“Until Trump’s tax and spending plan actually gets implemented, it’s hard to justify the slight increase in the slope of rate hikes.”

The Dow Jones industrial average fell 27.9 points, or 0.14 percent, to 19,883.31, the S&P 500 lost 6.02 points, or 0.26 percent, to 2,265.7 and the Nasdaq Composite dropped 7.17 points, or 0.13 percent, to 5,456.66.

Since the Nov. 8 U.S. presidential election, stocks have risen on bets that Trump will enact business-friendly policies and stimulate the economy. However, some market participants are concerned that equities are pricing in a very favorable scenario, leaving them vulnerable.

Markets had all but priced in a rate increase at the Fed but the faster pace of increases seen next year may give traders an excuse to cash in the recent gains.

“I’m beginning to think the market might be looking for an excuse to take some profits,” said David Schiegoleit, managing director at U.S. Bank Private Client Reserve in Los Angeles.

“We’ve had such a strong run here for the past couple of weeks that any excuse to take some money off the board might hold a little bit more water than usual. That could be what we see here and heading into the close.”

Oil prices fell more than 3 percent on renewed concerns about an oil glut sparked by rising U.S. crude inventories in storage.

Oil major Exxon declined 1.6 percent and was among the largest drags on the Dow.

Declining issues outnumbered advancing ones on the NYSE by a 2.47-to-1 ratio; on Nasdaq, a 2.29-to-1 ratio favored decliners.

The S&P 500 posted 30 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 102 new highs and 38 new lows.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

Wall Street treads water as investors await Fed decision

A trader wears a hat referencing the proximity of Dow Jones Industrial Average to 20,000 as he works on floor of the New York Stock Exchange (NYSE) shortly before the close of trading in New York, U.S.

By Tanya Agrawal

(Reuters) – Wall Street opened little changed on Wednesday, a day after all three major indexes hit record highs, as investors awaited the outcome of the U.S. Federal Reserve’s meeting.

The Fed is widely tipped to lift rates 25 basis points to 0.50-0.75 percent. The announcement is due at 2 p.m. ET (1900 GMT), followed by Chair Janet Yellen’s news conference 30 minutes later.

Market participants will be paying close attention to Yellen’s tone and new forecasts, seeking clues on policymakers’ thinking on how President-elect Donald Trump’s policies will impact growth and inflation.

However, concerns over a strengthening dollar linger with the dollar index, which measures the greenback against a basket of six major currencies, hitting 14-year peaks last month.

“Markets are acting like a zombie today ahead of the Fed decision,” said Naeem Aslam, chief market analyst at Think Markets.

“It is not that they are not expecting a rate hike from the Fed, it is the element of the unknown which Yellen would deliver in her statement.”

At 9:37 a.m. ET the Dow Jones industrial average was up 0.26 points, or 0 percent, at 19,911.47, the S&P 500 was up 0.47 points, or 0.020689 percent, at 2,272.19 and the Nasdaq Composite was up 7.65 points, or 0.14 percent, at 5,471.48.

Six of the 11 major S&P sectors were lower, with the financial index’s 0.91 percent fall leading the decliners.

Wells Fargo fell 2.5 percent to $54.43 after the bank’s “living will” failed U.S. regulators’ assessment for a second time this year.

Oil prices fell about 2 percent as glut worries resurfaced after a reported rise in U.S. crude inventories.

U.S. stocks hit new all-time highs on Tuesday and the Dow Jones industrial average ended fewer than 100 points away from the 20,000 mark as a post-election rally showed no signs of fatigue.

The Dow has climbed about 9 percent since the Nov. 8 election, with gains fueled by expectations that Trump will reduce taxes and regulation and stimulate the economy.

“I don’t think the Dow is an indicator of anything because it’s such a small sample and the way in which the index is constructed,” said Patrick Kaser, portfolio manager at Brandywine Global.

“But that said, right now we’ve been in a month of bullishness and optimism and so the mood will swing to skepticism as we wait for actual policies to come out.”

Meanwhile, U.S. retail sales barely rose in November as households cut back on purchases of motor vehicles. The Commerce Department said retail sales edged up 0.1 percent. Economists had forecast overall retail sales increasing 0.3 percent.

In a separate report, the Labor Department said its producer price index for final demand increased 0.4 percent last month, the largest gain since June, after being unchanged in October.

General Motors fell 2.5 percent to $36.40 and Ford declined 1.3 percent to $12.59 following a report that China will soon slap a penalty on an unnamed U.S. automaker for monopolistic behavior.

Hertz Global dropped 1.4 percent to $24.80 after the car rental company said on Tuesday it would replace its chief executive and reduce its board size.

Declining issues outnumbered advancers on the NYSE by 1,445 to 1,133. On the Nasdaq, 1,227 issues fell and 1,028 advanced.

The S&P 500 index showed six new 52-week highs and no new lows, while the Nasdaq recorded 26 new highs and six new lows.

(Reporting by Tanya Agrawal; Editing by Sriraj Kalluvila)

Wall Street hits new high as post-election rally roars ahead

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S.,

By Yashaswini Swamynathan

(Reuters) – Wall Street’s post-election rally showed no signs of fatigue as the three major indexes hit all-time highs on Thursday.

Donald Trump’s election as U.S. president last month sparked euphoria on Wall Street, with investors chasing stocks that are likely to gain from his proposals to spend more on infrastructure and simplify industry regulation.

“Investors are getting excited over the prospects of a new administration, a fresh mindset and a man who knows how to do business,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

“While there was also a technical aspect to the move yesterday … the mindset right now is that any pullback is seen as bullish. It’s an opportunity to buy into the market, not sell.”

The Dow industrials, the Dow Transport, the S&P 500 and the Russell 2000 indexes closed at record levels on Wednesday.

The European Central Bank unexpectedly reduced its asset purchase plans to 60 billion euros ($64 billion) from the current 80 billion euros on Thursday, but reserved the right to increase buying once again.

Adding to the bullish tone was a report that showed the number of Americans filing for unemployment benefits fell from a five-month high last week, pointing to a robust labor market and building on a recent spate of strong economic data.

At 9:42 a.m. ET the Dow Jones industrial average was up 39.58 points, or 0.2 percent, at 19,589.2. It hit a record high of 19,592.95 – its 10th since the Nov.8 election.

The S&P 500 was up 2.13 points, or 0.1 percent, at 2,243.48, slightly below its high of 2,243.56.

The Nasdaq Composite was up 8.60 points, or 0.16 percent, at 5,402.36, easing from a high of 5,403.88.

Eight of the 11 major S&P 500 sectors were lower, but the losses were offset by a 0.85 percent rise in financials and gains in materials and energy.

Bank of America, JPMorgan and Wells Fargo rose between 0.9 percent and 1.6 percent, boosting the S&P 500.

Investors, however, are likely to tread cautiously ahead of the Federal Reserve’s meeting next week, where traders see a more than 90 chance of an interest rate hike.

Lululemon soared 17.3 percent to $70.20 following the yoga and leisure apparel retailer’s reported of a better-than-expected quarterly profit.

Costco rose 2.5 percent to $157.86 in thin trading after the warehouse club retailer reported a quarterly profit that beat analysts’ expectations.

Declining issues outnumbered advancers on the NYSE by 1,317 to 1,289. On the Nasdaq, 1,141 issues rose and 1,126 fell.

The S&P 500 index showed 83 new 52-week highs and two new lows, while the Nasdaq recorded 173 new highs and five new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)

Dow set to open at record high; oil hits $55

Traders on the floor of the New York Stock Exchange

By Yashaswini Swamynathan

(Reuters) – The Dow was poised to open at an all-time high on Monday, as oil prices topped $55 a barrel for the first time in 16 months, and investors shrugged off the defeat of a referendum in Italy for constitutional reforms.

Futures lost ground slightly on Sunday after Italian Prime Minister Matteo Renzi said he would resign following the rejection.

However, world stocks, including Italian shares, reversed course to trade higher on Monday as investors bet against immediate snap elections in the country.

Brent crude prices were up 0.8 percent, after touching a high of $55.33, taking the total gains to 19 percent since Wednesday, when OPEC and other producers struck a deal to limit output to prop up prices. [O/R]

The Dow will open at a record intraday high, its eighth since Nov. 10, if active trading follows movement in futures. The index has marked four straight weeks of gains, benefiting from investors’ rotation into sectors such as financials, which are likely to gain from President-elect Donald Trump’s policies.

“You’ve got a very split tape with some sectors working well, like the financials and transports, while the rest of the market is not working well,” said Adam Sarhan, chief executive at Orlando, Florida-based 50 Park Investments.

However, Wall Street closed little changed on Friday as investors booked profits off bank stocks, despite a strong payrolls report that strengthened the prospects of an interest rate hike next week.

Dow e-minis <1YMc1> were up 73 points, or 0.38 percent, at 8:28 a.m. ET (130 GMT), with 57,797 contracts changing hands on Monday.

S&P 500 e-minis <ESc1> were up 6.5 points, or 0.3 percent, with 249,606 contracts traded.

Nasdaq 100 e-minis <NQc1> were up 17.5 points, or 0.37 percent, on volume of 39,369 contracts.

An Institute of Supply Management report is likely to show activity in the U.S. services sector rose slightly in November from the previous month. The report is due at 10:00 a.m. ET (1500 GMT)

New York Federal Reserve President and permanent voting member William Dudley said Trump’s election had created “considerable” uncertainty on the policies he would pursue so it was too soon for the Fed to judge whether its plan for gradual interest rate hikes needs adjusting.

Shares of Energy Transfer <ETP.N> dropped 6.9 percent to $32 after the U.S. Army Corps of Engineers turned down a permit for the company’s controversial pipeline project running through North Dakota.

FairPoint <FRP.O> shares jumped 14.4 percent after Consolidated Communications <CNSL.O> said it would buy the broadband service provider in an all-stock deal valued at $1.5 billion, including debt.

Chesapeake Energy <CHK.N> rose 4.2 percent to $7.53 after the U.S. natural gas producer said it would sell a part of its acreage in the Haynesville Shale area for $450 million to a private company.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila)

Wall Street swings in post-U.S. election rollercoaster

Traders work on the floor of the New York Stock Exchange

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks were little changed on Wednesday, rebounding from stunning overnight losses fueled by the U.S. election as sectors that appeared poised to benefit from a Donald Trump presidency led the charge.

After tremendous losses in the overnight session, the Dow and S&amp;P 500 briefly turned positive shortly after the open. Strong gains in the heavily weighted healthcare sector. SPXHC, up 2.9 percent, and financials. SPSY, up 2.5 percent, kept the market within striking distance of the unchanged level.

A curb on drug pricing was one of the key campaign themes for Democratic nominee Hillary Clinton, while Republican President-elect Donald Trump has called for repealing the Affordable Care Act and loosening restrictions on banks enacted after the financial crisis.

“There was the potential for, maybe not all the way to price controls, but certainly more pressure on some of the pharma names and that has likely gone away,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

“It remains to be seen what President Trump and the Republicans will do on the healthcare side, certainly that has been a drumbeat for eight years now about the repeal of Obamacare”

The Dow Jones industrial average. DJI rose 20.78 points, or 0.11 percent, to 18,353.52, the S&P 500 .SPX lost 2.1 points, or 0.1 percent, to 2,137.46 and the Nasdaq Composite dropped 12.34 points, or 0.24 percent, to 5,181.15.

Through the night, financial markets reacted violently to poll results and as Clinton’s path to victory narrowed. The S&P slid 5 percent and hit a limit down, meaning the contract could not trade lower, only sideways or up. Dow Industrials futures briefly fell 800 points.

Republicans also maintained their majorities in both chambers of the U.S. Congress, enabling the party to reshape Washington with two years of “unified” government.

“The reality is the President doesn’t dominate everything and we are still going to have a fairly split and divided Congress because even though the Republicans technically have control of the House and the Senate, they don’t have strong control,” said Jason Pride, director of investment strategy at Glenmede in Philadelphia.

“The lack of strong control kind of handicaps their ability to push through, or handicaps any one person, particularly the President’s ability, to push through extreme policies,” he said.

Wall Street is typically seen as preferring gridlock, or shared control of the White House and Congress, than a sweep of both chambers of Congress and the presidency.

The CBOE Volatility index futures shot nearly 40 percent higher at one point, reflecting investors’ reservations over a Trump presidency, but sharply retraced that advance after Trump’s acceptance speech. During the session the CBOE Volatility index. VIX was down 11.5 percent.

“Certainly (the trading floor) has a much different tone than what it did just several hours ago, but for now things remain very orderly and we would anticipate that tone to continue or improve as we get closer to the open,” said Ryan Larson, head of equity trading, U.S. at RBC Global Asset Management in Chicago, Illinois.

Big pharmaceutical names gained, with Pfizer PFE jumping 7.8 percent to $32.34. The iShares Nasdsaq Biotechnology ETF  climbed 7.2 percent and was on track for its biggest daily percentage gain in eight years.

(Additional reporting by Rodrigo Campos and Tanya Agrawal and Yashaswini Swamynathan; Editing by Chizu Nomiyama and Meredith Mazzilli)

Wall St stumbles as FBI to review more Clinton emails

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks erased early gains and turned negative on Friday after the head of the FBI said it will review more emails related to Democratic presidential candidate Hillary Clinton’s private email use.

Each of the three major indexes on Wall Street fell to session lows after FBI Director James Comey said in a letter to several congressional Republicans that the agency had learned of the existence of emails that appeared to be pertinent to its investigation. The election is scheduled to take place in 11 days, on Nov. 8.

“The market turned south the minute the headline hit the tape that the FBI is all of a sudden looking at (Hillary Clinton’s) emails again,” said Ken Polcari, Director of the NYSE floor division at O’Neil Securities in New York.

“The fact they are looking again just raises the prospect that once again they might find something, so the market turned south because it is expecting a Clinton win.”

Wall Street had been higher for most of the session after economic data showed the U.S. economy grew 2.9 percent in the third quarter, its fastest pace in two years, and upbeat earnings from Google parent company Alphabet Inc.

Alphabet shares were up 0.6 percent at $821.85.

While the report supports the case for an interest rate hike, the Federal Reserve is unlikely to make a move at its meeting next week, as it falls just days ahead of the U.S. presidential election.

The market is largely expecting the central bank to hike rates in December, with the odds of a rate increase that month  at 73.6 percent, according to the CME Group’s FedWatch tool.

Investors also digested the latest wave of earnings reports with the hope the latest quarter snaps a year-long earnings recession.

Nearly 73 percent of the S&P 500 companies that reported have topped Wall Street expectations, with growth for the quarter now expected to be 3 percent, according to Thomson Reuters I/B/E/S. The quarter had been expected to show a decline of 0.5 percent at the start of October.

On the negative side, Amazon.com was set for its worst day in nearly nine months, falling 4.8 percent to $778.74 after the online retailer warned that heavy investments in the crucial holiday quarter would hurt profits. The stock was the top drag on the S&P and the Nasdaq.

The Dow Jones industrial average &lt;.DJI&gt; fell 37.49 points, or 0.21 percent, to 18,132.19, the S&P 500 lost 9.81 points, or 0.46 percent, to 2,123.23 and the Nasdaq Composite dropped 29.05 points, or 0.56 percent, to 5,186.93.

Each of the major indexes were poised to post a decline for the week.

Amgen plunged 10.1 percent to $144.30 after the world’s largest biotechnology company’s sales for its flagship drug disappointed investors and analysts.

Declining issues outnumbered advancing ones on the NYSE by a 1.65-to-1 ratio; on Nasdaq, a 1.37-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 42 new highs and 112 new lows.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

Wall Street to open lower after North Korea test, Fed comments

Traders working at Stock Market

By Chuck Mikolajczak

NEW YORK (Reuters) – U.S. stocks were poised for a lower open on Friday amid investor caution following a nuclear test by North Korea and comments by a U.S. Federal Reserve official that supported an interest rate hike.

North Korea conducted its fifth and biggest nuclear test on Friday and said it had mastered the ability to mount a warhead on a ballistic missile, drawing condemnation from the United States as well as China, Pyongyang’s main ally.

“The timing of North Korea flexing their nuclear muscles is interesting in that it comes on the heels of the leader of the free world’s trip to Asia,” said Art Hogan, chief market strategist at Wunderlich Securities in New York, referring to President Barack Obama, who arrived in Asia last week to attend a G20 meeting before touring other Asian nations.

“So that is in and of itself kind of insulting but it’s also disturbing if they are making significant traction here, but it’s hard to know.”

Futures extended losses after Boston Fed President Eric Rosengren, a historically dovish policymaker, said the Federal Reserve increasingly faces risks if it waits too much longer so a gradual policy tightening is likely appropriate.

S&P 500 e-minis <ESc1> were down 11.75 points, or 0.54 percent, with 148,435 contracts changing hands. Nasdaq 100 e-minis <NQc1> were down 28.25 points, or 0.59 percent, in volume of 15,946 contracts and Dow e-minis <1YMc1> were down 101 points, or 0.55 percent, with 16,420 contracts changing hands.

At 9:30 EDT (1330 GMT), Federal Reserve Bank of Dallas President Robert Kaplan, a non-voting member, is scheduled to speak.

The Fed will hold a two-day policy meeting on Sept. 20-21. Expectations for a rate hike had climbed in recent weeks after comments from a number of Fed officials, only to be tamped down again in the past several days after a host of disappointing economic reports. The current expectations for a September rate hike stand at 18 percent, according to CME’s FedWatch tool.

U.S. stocks have been subdued for two months, with the benchmark S&P 500 index failing to register a move of more than 1 percent on a closing basis in either direction since July 8. The index is still only 0.4 percent away from its last record high registered on Aug. 15.

Data due on Friday includes July wholesale inventories at 10 a.m. EDT (1400 GMT), which are not expected to have changed from the prior month.

Also due is the weekly rig count from Baker Hughes, which could impact the price of oil after both Brent <LCOc1> and U.S. <CLc1> prices surged more than 4 percent Thursday in the wake of a surprisingly huge drawdown in U.S. crude stocks.

Restoration Hardware <RH.N> shares surged 10.3 percent to $38.94 in premarket trading after the company posted second-quarter earnings that topped Wall Street expectations.

Pipeline company Enterprise Products Partners <EPD.N> late Thursday withdrew its takeover bid for rival Williams Cos Inc <WMB.N>, saying Williams’ lack of engagement left it with “no actionable path forward.”

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

Oil rally under pressure; record Saudi output offsets U.S. drawdown

Oil field

By Barani Krishnan

NEW YORK (Reuters) – Oil’s near week-long rally was under pressure on Wednesday after an unexpected drawdown in U.S. crude and gasoline stocks was offset by worries that Saudi Arabia was cranking output to record highs even as OPEC talked of ways to ease a global glut.

U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down 5 cents at $46.53 a barrel by 1:03 p.m. EDT (1703 GMT), after trading as much as 21 cents higher.

Brent crude futures <LCOc1> rose by 42 cents to $49.65 a barrel. It reached five-week highs of $49.75 earlier.

WTI’s discount to Brent <WTCLc1-LCOc1> widened to a six-month high, raising the export potential for U.S. crude.

Oil rallied about 11 percent over the past four sessions since Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation the group was ready to reach an output freeze agreement with non-OPEC producers.

The markets briefly extended gains after the U.S. Energy Information Administration (EIA) said domestic crude inventories fell 2.5 million barrels last week, surprising analysts who had expected a build of 522,000 barrels. [EIA/S]

Gasoline stockpiles also fell 2.7 million barrels, more than expectations for a 1.6 million-barrel drop, the EIA data showed.

But the market’s upside was capped by a Reuters report that said Saudi Arabia could boost crude output in August to new records at 10.8-10.9 million bpd, overtaking Russia’s production, even as OPEC aims for a pact to curb global output.

The Saudis told OPEC they pumped 10.67 million bpd in July, versus their previous record of 10.56 million in June 2015. [OPEC/M]

Saudi-based industry sources said earlier in the year they expected the kingdom’s output to edge near record highs to meet summer demand for power. But they said it was unlikely that Saudi output will flood the market.

“One certain thing to be aware of is the Reuters report that Saudis may increase production to new record highs pushing near 11 million barrels per day,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York.

“With the U.S. rig count coming back online for several weeks, even if a freeze did happen we would be talking about freezing at higher levels of output,” Zahir said.

Before last week’s drawdown, U.S. crude stockpiles had risen unexpectedly in three previous weeks. The U.S. oil drilling rig count has also risen without pause for seven weeks, signaling more production ahead. [RIG/U]

Reports of refinery outages in the United States, including a crude unit at Exxon Mobil Corp’s <XOM.N> 502,500 barrel per day (bpd) plant at Baton Rouge in Louisiana, added to the market’s downside. [REF/OUT]

Traders will be on the lookout for a U.S. Federal Reserve statement due at 2:00 p.m. (1800 GMT) to gauge if interest rates are to rise soon.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; editing by Jason Neely and Marguerita Choy)