U.S. Stocks Resume Advance; Oil Rallies

Investors Look for Direction as Stocks Swing
  • Dow average climbs 115 points as S&P 500 adds 0.8 percent
  • ECB's Draghi says additional stimulus will be used if needed

U.S. stocks overcame an afternoon slump to rebound from the lowest level in 21 months, as crude surged toward $30 amid signals from China and Europe that officials will add to stimulus if needed. Treasuries fell with gold as haven demand waned.

The Dow Jones Industrial Average rose 115 points in a seesaw session that had the gauge erase almost all of a 270-point rally before ending higher. Investors piled into risk assets, boosting European equities to the biggest gain in a month and sending crude 4.2 percent higher, after the European Central Bank said it may bolster support as soon as March. China’s vice president said the government would intervene to tamp down market volatility. The yield on the 10-year Treasury note rose to 2.02 percent.

“Today has been a technical bounce just after being oversold and also in congruence with oil being up today,” said Aaron Jett, vice president of global equity research at Los Angeles-based Bel Air Investment Advisors LLC. “There’s no question there’s a lot of concern. We’re speaking with clients quite frequently. There’s so much negativity out there and that’s often a contrarian sign that things aren’t as bad as they seem, they’re overblown. If the dollar can stabilize and if oil can stabilize, I think the market can stabilize.”

ECB President Mario Draghi signaled at his briefing Thursday that additional support is available as soon as March as distress in China shows few signs of abating and oil’s slump fuels disinflation. Risks to economic growth have increased amid the financial-market turmoil that has erased more than $15 trillion from global equity values as markets from Japan to Germany and Brazil plunged into bear territory.

Crude’s climb above $29 a barrel in New York provided a glimmer of relief to commodities investors battered by an oversupply in resources from oil to copper and wheat. Calling the country’s market “not yet mature,” China’s Vice President Li Yuanchao said the government would boost regulation in an effort to avoid too much volatility. Corporate earnings may also offer clues on the robustness of the U.S. recovery, with the few companies that have reported so far mostly exceeding estimates.

“There’s been a lot of fear, but the low oil price doesn’t mean that demand is collapsing,” said Brad McMillan, chief investment officer of Commonwealth Financial Network in Waltham, Massachusetts, which oversees $100 billion. “It means there’s a supply imbalance and that’s OK. The market is taking a good hard look at fundamentals in the U.S. and saying things aren’t actually that bad after all. Look at jobs and consumer comfort, they’re pretty solid.”

Stocks

The S&P 500 rose 0.5 percent at 4 p.m. in New York, capping a session that saw it rise as much as 1.6 percent after falling 1.2 percent Wednesday to the lowest since April 2014. The index has swung from gains to losses for seven consecutive sessions as investors seek a bottom to a rout this year that’s erased 8.3 percent from the benchmark.

Energy shares paced gains with a 3.1 percent advance. Chevron Corp. climbed 2.6 percent and Home Depot Inc. surged 3.5 percent as energy and consumer discretionary companies paced the rebound from yesterday’s selloff. Verizon Communications Inc. gained 3.5 percent after its profit beat estimates. Union Pacific Corp. fell 4.9 percent after its earnings missed forecasts.

“I think people are starting to believe that while we may not be at an absolute bottom, we may be close,” said Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. “Oil has been a very strong theme, though I think certainly in months that are heavy in central bank decisions that central bank activity has to a degree overwhelmed oil.”

The Stoxx 600 climbed 1.9 percent for its best gain since Dec. 23. A weakening euro boosted exporters and commodity producers.

Emerging Markets

The MSCI Emerging Markets Index fell 0.4 percent to the lowest level since May 2009. The gauge is down 13 percent this year and trades at 10.1 times its 12-month projected earnings, the least since March 2014.

Brazil’s real sank to a four-month low and bond traders priced in faster inflation after the central bank’s surprise decision to keep interest-rates unchanged raised questions about the institution’s independence.

Bonds

Treasuries fell, sending the yield on the 10-year note higher by four basis points to 2.02 percent as demand for haven assets waned. The bond market is starting to doubt whether the Federal Reserve will be able to raise interest rates at all this year as the global economic outlook dims.

European bonds climbed on the ECB comments. Italian bonds extended gains, while yields on Austrian, Belgian, French and Finnish two-year notes tumbled to records. The advance pushed Germany’s 10-year yield to a level last seen before the ECB’s previous policy meeting, when Draghi’s package of measures underwhelmed some investors.

Currencies

The euro fell the most in almost two weeks after Draghi hinted at further monetary stimulus. While Draghi reiterated that the euro is “not a policy target,” he said the ECB was conscious of the effective exchange rate. Easing typically weakens a currency, which in turn, can help stimulate growth and inflation.

The shared currency dropped 0.6 percent, the most since Jan. 11, to $1.0831. The dollar gained 0.6 percent to 117.66 yen.

The Canadian dollar strengthened the most in 10 months as crude-oil prices rose. The currency gained for a second day after snapping its longest-ever 13-day losing streak.

Commodities

Oil rose from its lowest close in more than 12 years as inventors tried to pick a bottom after government inventory data. Futures rose as much as 6.7 percent in New York. U.S. stockpiles climbed 3.98 million barrels last week, the Energy Information Administration said Thursday. The American Petroleum Institute reported a 4.6 million barrel gain Wednesday.

Copper advanced, leading industrial metals higher and helping miners rebound from a 12-year low. Futures for delivery in March rose 1.3 percent to $1.9855 a pound in New York.

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