That was fast.
The stock market freak out of 2015 lasted a grand total of three days. The market is back on the upswing thanks to oil prices stabilizing and central bankers around the world reiterating their willingness to do what it takes to keep the world economy humming. Will it last?
The Dow soared another 300 points on Thursday and is quickly approaching the 18,000 level it first breached late last year. The S&P 500, after its worst start since 2008, is up over 1.5% today. It has surged a whopping 3% since its low point on Tuesday afternoon.
“We keep having these buying dips. This was one of the shorter ones,” said Ed Yardeni, president of investment advisory Yardeni Research.
Easy money: He pointed to recent comments by Charles Evans, president of the Federal Reserve Bank of Chicago, who said this week that it would be a “catastrophe” if the central bank tightens interest rates too soon.
“This bull market has been driven by central bankers who continue to provide liquidity with near-zero rates, making stocks look awfully compelling,” Yardeni said. “The Fed continues to spread fairy dust on this market — and it keeps working.”
The Federal Reserve released the minutes of its December meet yesterday afternoon, which also helped brighten the mood of the market. They suggest the central bank is optimistic about the U.S. economy, but in no rush to raise rates.
Several Fed members went as far as to predict that U.S. growth in 2015 will be even stronger than previously thought.
Oil finding a bottom? At the same time, crude oil appears to finally have stabilized after weeks of dramatic selling that left it below $50 a barrel for the first time since the Great Recession. It’s settled around the $48 a barrel level, allowing investors with exposure to battered energy stocks to breathe a sigh of relief.
The energy sector of the S&P 500 soared 2.4% on Thursday, led by big gains from Valero, Apache and Devon Energy.
While low prices are very good for consumers, they have been spooking the stock market in recent days. There’s concern the pain in energy could spread to other sectors. It’s also doing lots of damage to the estimated profits of big energy companies.
The apparent oil price stabilization “matters an awful lot” to the stock market, said Peter Kenny, chief market strategist at The Clear Pool Group. “It’s very important to know or have transparency into as many constants as possible.”
Markets don’t like uncertainty and when the oil price appeared to be in free fall in recent weeks — plunging below $60 and then below $50, it became a guessing game of how low would oil go?
Of course, it’s too early to know whether the market rebound will last. The reality is market sentiment shifts all the time and with a big U.S. employment report out first thing Friday and then corporate earning for the fourth quarter starting to come out next week, investors will have a lot to mull over.
