After suffering a steep selloff since the week started, stocks are attempting to stage a comeback on Wednesday as crude prices are trying to stabilize after a historic drop.
The Dow Jones Industrial Average rallied 432 points, or 1.9%, as the S&P 500 was lifted 2% while the Nasdaq Composite climbed 2.3%.
Index ETFs that follow the stock indices are making gains Wednesday as well. The Invesco QQQ Trust (NASDAQ: QQQ) has rallied 2.45%, the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) has added 1.72%, and the SPDR S&P 500 ETF (NYSEArca: SPY) has climbed 1.96%.
In addition to ongoing coronavirus worries, stock markets were jolted after crude oil plummeted to an unprecedented -$37 a barrel for the May contract, as oversupply and limited storage options left traders and investors scrambling to sell oil at any price as the new futures contract for June approached.
“The short term story in the market remains oil. Yet, this is much bigger than oil,” wrote Gregory Faranello, head of U.S. rates trading at AmeriVet Securities. “The price action over the last 48 hours not only points us back to the economy and demand-side but is showing signs of spillover and contagion in risk toward other markets.”
“This week, investors are realizing that even though the crisis could soon get better, the negative impacts of having an economy which is essentially shut down are magnifying at an alarming rate. With no demand even for a couple of months, energy prices go negative as excess oil supplies balloon,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC.
Solid earnings from Chipotle and a $484 billion coronavirus relief package that the Senate passed on Tuesday, concentrating on small businesses, hospitals, and testing is also providing investors and markets with some much-needed optimism. The House is hoping to approve the bill as early as Thursday.
While stocks indices rallied roughly 30% from their late-March lows in less than a month, Alicia Levine, chief strategist at BNY Mellon Investment Management, believes the market might be moving too quickly.
“The market is pricing in a V-shaped recovery. And we think that’s actually kind of questionable because we’re worried about the impact of a possible second wave,” of coronavirus cases, Levine said on CNN Business’ digital live show Markets Now.
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