Stocks Bounce Back As Energy Markets Go Haywire

The stock market finished higher following a very choppy session, with insane volatility in the energy sector, as investors digested the mixed COVID-related headlines and the weak job market indicators. The Dow was up 470 or 2.2%, to 21,413, the Nasdaq gained 127, or 1.7%, to 7,487, while the S&P 500 rose by 56, or 2.3%, to 2,527. Advancing issues outnumbered decliners by a 6-to-5 ratio on the NYSE, where volume was moderate.

Traders said that bulls were hoping for a stronger recovery following yesterday’s plunge, but the continued weakness among small-caps, together with the surge in jobless claims, were too much to overcome. As one trader explained, “Outside of the energy sector, today’s session was mixed, at best, and since the virus-sensitive stocks continued to lag and breadth remained anemic, the short-term outlook is still gloomy.”

While the U.S. COVID-19 numbers continue to grow exponentially, the slow improvements in Europe and the stable Asian situation provided some relief today. Financial markets also settled down somewhat, even though the worries about the global economy persisted, weighing on the most impacted industries. The doubts regarding the size of the small-business bailout fund continued to pressure small-caps today, with the corporate bond market also experiencing wild swings, suggesting that today’s dip in volatility might only be temporary.

The energy sector had an extremely volatile day due to President Trump’s comments regarding the end of the oil price war between Saudi Arabia and Russia. However, energy-related stocks gave back most of their gains after the two countries denied the agreement. The price of oil still rose by more than 20% today, as China started buying to increase its strategic reserve, while the fact that Saudi Arabia did call for an emergency OPEC+ meeting gave credit to the President’s words, supporting the crucial commodity in late trading.

The weekly number of new jobless claims hit another record high today topping 6 million, and the Challenger job cuts estimate also confirmed the weak job market conditions. With more and more investors turning their attention to the economic impact of the pandemic, these negative early indicators could weigh heavily on risk assets, at least short-term. Analysts agree that the job market could quickly rebound when the lockdowns end, and even though a full recovery could take a lot of time in some of the sectors, judging only by today’s releases might be a mistake.

As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!

Joe