Oil-price jump gives stocks a boost

In this photo taken from video provided by the New York Stock Exchange, Robert Glorioso, chief of Building Engineering Operations, rings the exchange’s opening bell Thursday.
(AP)
In this photo taken from video provided by the New York Stock Exchange, Robert Glorioso, chief of Building Engineering Operations, rings the exchange’s opening bell Thursday. (AP)

NEW YORK -- Wall Street rallied Thursday for its first gain in three days after a sudden surge in oil prices revived beaten-down energy stocks. But, as has so often been the case in this year's market sell-off, it took a few U-turns to get there.

The price of crude spurted as much as 30% higher after President Donald Trump said he expects Russia and Saudi Arabia to back away from their price war, which broke out last month and helped drag U.S. oil to its lowest price in 18 years. The surge lifted energy stocks enough to pull the S&P 500 higher and outshine a report showing that millions of Americans are joining the unemployment line by the week.

But stocks and oil quickly pared much of their initial gains and then seesawed through the day as markets weighed how seriously to take Trump's statement, particularly after the Kremlin reportedly disputed part of his tweet, before climbing again to the close.

By the end of trading, the S&P 500 rose 2.28%, while U.S. oil was up $5.01, or 24.7%, after settling at $25.32 per barrel.

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The S&P 500 rose 56.40 to 2,526.90. The Dow Jones Industrial Average gained 469.93, or 2.2%, to 21,413.44, and the Nasdaq rose 126.73, or 1.7%, to 7,487.31.

"Investors are just grasping at a positive straw here on a particular day," said Phil Orlando, chief equity market strategist at Federated Hermes. "The collapse in the energy market is creating a significant amount of additional pressure on the U.S. economy, not nearly as significant as the coronavirus, but significant nonetheless."

The market's focus has been on oil not just because its plunge to below $20 earlier this week from $60 at the start of the year has caused stocks in the industry to more than halve. Another worry is that heavily indebted oil companies will also be forced to default, which could cause more damage in the bond market where the total amount of debt has exploded.

Producers have been continuing to pull oil from the ground to maintain their market share, even as demand for energy cratered because of widespread stay-at-home orders and other economy-damaging restrictions caused by the coronavirus outbreak. Trump tweeted Thursday that he hopes and expects cuts in production are coming after talking with Saudi Crown Prince Mohammed bin Salman.

That helped energy stocks in the S&P 500 rally 9.1%, by far the biggest gain among the 11 sectors that make up the index. Schlumberger jumped 10.2%, EOG Resources rose 10.7% and Occidental Petroleum leaped 18.9%, though all three remain down between 50% and 70% for the year.

The energy sector in recent years has shrunk as a portion of the nation's economy compared with rising industries such as technology and health care. But its role as a huge employer and a producer of one of the most important commodities on the planet gives it a crucial role in the daily life of the U.S.

"This is a knee-jerk reaction more than anything else," said Willie Delwiche, investment strategist at Baird. "I don't think it changes much of the bigger picture for what we're going through in terms of economic uncertainty and trying to wrap our minds around the extent of the weakness we're going to see."

The S&P 500 was down as much as 0.6% earlier Thursday after the U.S. government reported that more than 6.6 million Americans applied for unemployment benefits last week. That's double the previous week's number, which itself was nearly five times the previous record set in 1982.

Job losses are wide in scope, touching industries as diverse as retail and travel to professional services and manufacturing.

Roughly one of every 16 Americans in the workforce has applied for unemployment benefits in the past two weeks, and economists expect the number to rise further. That has many investors bracing for what may be the worst recession of their lifetimes.

Many investors expect markets to remain volatile until the number of new coronavirus infections peaks. Only that can clear the uncertainty about how bad the coming downturn will be and how long it will last.

The S&P 500 is still down nearly 22% for 2020 so far, and investors are preparing for companies to soon begin reporting weaker profits from year-ago levels. Earnings reporting season for the first quarter kicks off in earnest in two weeks.

"The duration and impact of this virus remains unknown and volatility will remain the norm and not the exception," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

"It's hard to envision the market moving meaningfully higher until you get some visibility of where earnings are going to go," he said.

To help cushion the blow, Congress last week agreed on a $2.2 trillion economic aid package and the Federal Reserve promised to buy as many Treasurys as needed to keep credit markets running smoothly.

The Fed's moves in particular have helped improve trading in markets that provide lending to governments, hospitals, companies and other vital areas of the economy, investors say.

Information for this article was contributed by Cathy Bussewitz of The Associated Press and by Thomas Heath of The Washington Post.

Business on 04/03/2020

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