Stock Index ETFs Rally Amid Surging Oil Prices & Hope Country Reopens

Stocks are deep in the green on Tuesday, amid rocketing oil prices and optimism about a potential reopening of a number of states in the U.S.

The Dow Jones Industrial Average is trading more than 323 points higher, or 0.1.35%, while the S&P 500 gained 1.6% as of 1pm EST. The Nasdaq Composite is making the largest gains of the three benchmark indexes, adding 1.84%, led by a majority of green sectors including technology, energy, and healthcare. The Technology Select Sector SPDR Fund (XLF) has climbed more than 2% amid the optimism, while the Energy Select Sector SPDR Fund (XLE) gained 2.29%, and the Health Care Select Sector SPDR Fund (XLV) gained 2.51%.

Stock index ETFs are also rallying on the news for a second day, with the SPDR S&P 500 ETF Trust (SPY), the SPDR Dow Jones Industrial Average ETF (DIA), and the Invesco QQQ Trust (QQQ) all green in early afternoon trading.

Investors and analysts are excited but cautious about the prospect that the country will start to reopen gradually.

Former New Jersey Gov. Chris Christie said Monday that the country needs to reopen, despite unique, dire key coronavirus models that project thousands may die daily in the United States from Covid-19 and that more than 100,000 may die in total, a number that President Trump had mentioned before.

“Of course, everybody wants to save every life they can — but the question is, towards what end, ultimately?” Christie told CNN’s Dana Bash on The Daily DC Podcast. “Are there ways that we can… thread the middle here to allow that there are going to be deaths, and there are going to be deaths no matter what?”

Christie told Bash that “we’ve got to let some of these folks get back to work because if we don’t, we’re going to destroy the American way of life in these families — and it will be years and years before we can recover.”

Crude oil’s more than 20.5% move on Tuesday is also helping lift markets, as WTI trades over $4 higher on the day, amid production cuts and improving demand. Analysts are elated by the move, heralding a bottom for demand, and looking for the oil market to continue to strengthen.

“One thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise,” said Per Magnus Nysveen, Rystad Energy’s head of analysis. The “key reason behind the price strengthening is regional traffic data, which indicates the demand bottom is behind us,” he added.

Despite the rally, however, WTI and Brent crude are still in a bear market, having plummeted 68% and 62%, respectively, from their 52-week high levels, and traders warn that recovery for oil prices may not be so swift. Even with global producers limiting operations, global storage is rapidly being depleted and some believe tank highs could be achieved within weeks.

“The path to recovery for oil demand in the US and globally is still up in the air,” Stacey Morris, director of research at Alerian.

And Nysveen believes the “market is still vulnerable.”

“The existing problems did not magically get resolved, the storage constraint is still there … We remain very cautious short term, but our view is that we will see a price recovery on the longer term,” Nysveen added.

For more market trends, visit  ETF Trends.

Stock Index ETFs Rally Amid Surging Oil Prices & Hope Country Reopens

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