Stocks rallied Thursday as rising oil prices overcame Wall Street’s worries about the coronavirus gutting the US labor market. The Dow Jones industrial average climbed as much as 534.26 points, or 2.5 percent, on hopes of a detente in the oil-price war between Russia and Saudi Arabia. The blue-chip index reversed the early losses it …
Stocks rallied Thursday as rising oil prices overcame Wall Street’s worries about the coronavirus gutting the US labor market.
The Dow Jones industrial average climbed as much as 534.26 points, or 2.5 percent, on hopes of a detente in the oil-price war between Russia and Saudi Arabia.
The blue-chip index reversed the early losses it took after the US Department of Labor revealed more than 6.6 million people filed initial jobless claims last week as the coronavirus crisis spurred even more layoffs. The S&P 500 and the Nasdaq Composite followed a similar pattern to jump as much as 2.5 and 1.9 percent, respectively.
The rise in stocks accompanied a surge in crude oil prices after President Trump tweeted that he expects Russia and Saudi Arabia to cut oil production by as many as million barrels. West Texas Intermediate crude was up 24.2 percent at $25.23 a barrel as of 1:03 p.m.
Investors managed to shake off a record-shattering spike in applications for unemployment benefits for the second straight week as the economic impact of the coronavirus pandemic became clearer. Some 3.3 million unemployment claims were reported last Thursday as hopes for a stimulus package to address the coronavirus pandemic spurred a rally on Wall Street.
The grim data validates the massive selloff that has plunged US stocks into a bear market amid fears about the virus causing a global recession, experts say.
“We’re starting to see facts, no matter how bad they are, replace some speculation,” said Tom Plumb, portfolio manager of the Plumb Balanced Fund. “That is a real good sign of the bottoming process. Markets don’t turn and start to go up all of a sudden because there’s a green light and great news.”
But stocks could fall beyond their recent lows once investors come to grips with just how deep the virus crisis has cut into the economy, said Andrew Smith, chief investment officer at Delos Capital Advisors.
Companies that have laid off workers are “not going to turn the spigot on the second we get through the coronavirus,” Smith said.
Trump’s comments Thursday offered investors some relief from the historic plunge in oil prices fueled by Russia and Saudi Arabia’s dispute, which has further strained an energy market already struggling with low demand stemming from the coronavirus crisis.
The Saudis threatened to flood the market with oil last month after Russia rejected a deal to reduce production. That caused a massive disruption that delivered a beating to debt-laden US oil companies and sparked fears about their distress bleeding over into other parts of economy, according to experts.
While Trump’s tweet wasn’t as substantive as a formal deal, Wall Street latched onto the glimmer of hope that an end to the untenable spat is in sight, according to David Lebovitz, global market strategist at JP Morgan Asset Management.
“What I think it does is draws a line in the sand, or attempts to draw a line in the sand, in terms of how long these historically low oil prices will persist,” Lebovitz said.