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Wall Street Rises 2% as Soaring Oil Eclipses Record Weekly Jobless Claims

Wall Street Rises 2% as Soaring Oil Eclipses Record Weekly Jobless Claims
(Dreamstime.com)

Thursday, 02 April 2020 04:39 PM

U.S. stocks rallied on Thursday as hopes for a truce in the price war between Saudi Arabia and Russia and a cut in oil output drove gains, taking some sting out of a shocking jump in Americans filing jobless claims due to coronavirus-led lockdowns.

The S&P energy index, down by more than 50% this year due to the Russia-Saudi price war and coronavirus-driven demand worries that has caused oil prices to plunge, climbed 9.08%.

Saudi Arabia has called for an emergency meeting of oil producers, while U.S. President Donald Trump said he expected the kingdom and Russia to cut output by as much as 10 million to 15 million barrels a day. That helped U.S. crude futures settle up 24.7%, and Brent up 21.5%, their biggest daily percentage gains on record.

Still, major averages waded into negative territory multiple times before a late rally pushed stocks higher to close near session highs.

"It got beaten up so badly, you don’t rally like this unless it was many people thinking this got overdone," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

The Dow Jones Industrial Average rose 469.93 points, or 2.24%, to 21,413.44, the S&P 500 gained 56.4 points, or 2.28%, to 2,526.9 and the Nasdaq Composite added 126.73 points, or 1.72%, to 7,487.31.

The list of top gainers on the benchmark S&P 500 was littered with oil companies. Occidental Petroleum surged 18.90%, with names such as Apache Corp and Halliburton also seeing double-digit percentage gains.

A bump in prices may still not be enough to save some of the debt-laden U.S. shale companies that are on the brink of bankruptcy as demand continues to plunge due to the coronavirus pandemic.

Analysts foresee a further decline in U.S. stocks as country-wide shutdowns to limit the spread of the virus result in a virtual halt in business activity and force companies to lay off employees and save cash.

Boeing Co, once a symbol of America's industrial might, has offered buyout and early retirement packages to employees, sending its shares down 5.68%.

Investors continue to absorb a wave of bad economic news that will continue to paint a grim picture. Initial claims for unemployment benefits last week rose to 6.65 million, exceeding the top end of economists' estimates at 5.25 million.

"Overall this is a little bit of a victory in and of the fact that it was such a bad number and the market did kind of shake it off. It is also the market preparing for a lot more bad numbers," said Kinahan.

As earnings season slowly begins to get underway, Walgreens fell 6.30% after the drugstore retailer reported a steep decline in U.S same-store sales in the last week of March.

Advancing issues outnumbered declining ones on the NYSE by a 1.61-to-1 ratio; on Nasdaq, a 1.34-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 20 new lows; the Nasdaq Composite recorded 6 new highs and 132 new lows.

Volume on U.S. exchanges was 12.64 billion shares, compared with the 15.87 billion average for the full session over the last 20 trading days. 

GLOBAL MARKETS

World equity markets climbed on a surge in risky assets like oil, offsetting concerns over an increasing death toll from the coronavirus pandemic that is expected to push the global economy into recession.

Investors sought the safety of the U.S. dollar and government bonds. Stocks and oil futures were among the few risk assets that advanced, with oil benchmarks surging 20% after U.S. President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war.

MSCI's gauge of stocks across the globe rose 1.20% after broad declines in Japan. European shares also rose 0.42% despite data showing U.S. weekly jobless claims jumped to a record 6.6 million, double the record from the previous week.

"Most of the selling was done yesterday in anticipation of the jobs number and investors were looking for entry points as everyone expected it to be bad and they have been," said Jamie Cox, managing partner of Harris Financial Group in New York.

"A lot the trading has been on fixed income because if oil prices stabilize, that will stabilize the bond market and will feed through to reduced default risk."

Investors sought the perceived safety of government bonds. Benchmark U.S. 10-year notes last rose 3/32 in price to yield 0.6251%, from 0.635% after trading hours on Wednesday.

The World Health Organization said the global case count would reach 1 million and the death toll 50,000 in the next few days. It currently stands at 46,906.

Trump, who had initially played down the outbreak, told reporters at the White House on Wednesday that he is considering a plan to halt flights to coronavirus hot zones in the United States.

In currency markets, the dollar rose 0.632% against a basket of six major currencies after a gain of 0.53% overnight. The euro traded down 0.99% at $1.0853 as the dollar advanced.

Brent crude futures jumped 20.9% to $29.91. U.S. West Texas Intermediate (WTI) crude futures soared 21% to $24.73.

Trump said he had talked with the leaders of both Russia and Saudi Arabia and believed the two countries would make a deal within a "few days" to lower production, thereby bring prices back up.

© 2020 Thomson/Reuters. All rights reserved.


   
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U.S. stocks rallied on Thursday as hopes for a truce in an oil price war between Saudi Arabia and Russia and a cut in oil output drove gains, taking some sting out of a shocking jump in Americans filing jobless claims due to coronavirus-led lockdowns.
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2020-39-02
Thursday, 02 April 2020 04:39 PM
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