While you were sleeping: Oil price, Wall St bounce as junk bonds fold

UPDATED 1pm: Equities slid then recovered with the price of oil as investors awaited the result of the US Federal Reserve two-day meeting starting on Tuesday.

The Federal Open Market Committee is widely expected to announce its first interest rate increase since 2006 on Wednesday and investors will be watching a press conference by chairwoman Janet Yellen at the end of the meeting to gauge the Fed's view on further increases.

Oil slid further in early, with Brent crude down 4% and US West Texas Intermediate nearly 3% down at midday in New York, amid persistent concern about worldwide oversupply at a time of weakening demand in the global economy.

At one stage, US oil briefly dipped below $US35 a barrel but recovered by the close. settling 1.9% higher at $US36.31.

"It's the (Fed) communiqué that's going to count but the real problem here is the junk bond market, which is tied to oil prices," Peter Cardillo, chief market economist at First Standard Financial in New York, told Reuters.

"A lot of paper written to oil companies is in question, and so it ties in with the price of oil."

Wall Street closed higher with the Dow Jones Industrial Average rising 0.6%, or 103.29 points,to 17,368.50. The Standard & Poor's 500 Index finished up 0.5% at 2021.94, while the Nasdaq Composite Index rose 0.4% to 4952.23.

Gold for February delivery shed 1.1%, or $US12.30 to settle at $US1063.40 an ounce.

"Nobody is ready to go in and buy and at the moment the sentiment is stay out of the commodities, oil and high-yield sector," Benno Galliker, a trader at Luzerner Kantonalbank in Lucerne, Switzerland, told Bloomberg. "If you have any performance left you want to secure it before the year-end. The big news is on Wednesday with the Fed hiking rates but, until then, the market will react to everything."

As oil recovered, shares of Chevron and Exxon Mobil rose 3.3% and 2.3% respectively.

Shares of Apple fell as Morgan Stanley and Barclays downgraded their price targets on the stock.

Shares of GoPro also lost favour with some analysts. Morgan Stanley and Citi cut their ratings and price targets on the stock. It last traded 16.5% lower.

"Likelihood that high inventory persists into 2016, slower consumer drone opportunity, and later assumed HERO 5 [widely anticipated sports action camera release] compels us to cut estimates," Morgan Stanley analyst James Faucette wrote in a note to investors, according to Bloomberg.

In corporate news, Newell Rubbermaid agreed to buy Jarden in a deal that would unite brands such as Sharpie markers and Yankee Candle. Newell’s shares fell 6.9%, while Jarden shares added 2.7%.

Shares of DuPont fell 3.6% and Dow Chemical fell 3.9% after the companies announced on Friday that they would merge to create a $US130 billion chemicals giant.

US treasuries also declined, pushing yields on the 10-year note six basis points higher to 2.19%.

In Europe, the Stoxx 600 Index finished the session with a 1.8% slide from the previous close, thanks to a drop in mining and energy stocks. The UK's FTSE 100 Index declined 1.3%, France's CAC 40 Index retreated 1.7%, while Germany's DAX Index shed 1.9%.

UPDATED for the Wall Street close (10am NZ time)

(BusinessDesk)