Global stocks climb as oil prices rocket higher
NEW YORK: Wall Street pushed higher Thursday after a surge in oil prices helped resuscitate beaten-down energy stocks. The gains helped over shadow another report showing the corona virus outbreak is forcing a record-breaking number of Americans into the unemployment queue.
The S&P 500 rose more than 1.5% in morning trading after flipping between small gains and losses shortly after the open. It took off with the price of oil, which surged immediately after President Donald Trump said he expects Saudi Arabia and Russia to back away from their price war.
Separately, Saudi Arabia called on Thursday for an emergency meeting of Opec, Russia and other oil producers to stabilise the oil market, which has been in turmoil since a deal on supply curbs collapsed and Riyadh began pumping extra crude into an oversupplied market.
The announcement made by Saudi Arabia on Thursday, which drove oil prices as much as 25% higher on the day, adds to growing signs that Riyadh and Moscow may be ready to end their battle for market share and cooperate again.
Saudi Arabia called for the emergency meeting of the Organization of the Petroleum Exporting Countries and other producers, a grouping known as OPEC+, saying Riyadh wanted a fair oil agreement to stabilise the market, state news agency SPA reported.
“Saudi Arabia has always welcomed and supported cooperation among oil producers in their efforts to stabilise the oil market during the current crisis, based on the principles of fairness and equity,” the source said.
Oil futures rocketed over 30 per cent on Thursday after US President Donald Trump tweet.
Brent North Sea crude soared as high as $36.29 per barrel before pairing gains to stand up almost 25 per cent at $30.82. WTI surged to $27.39 per barrel and shortly after was 25.4 per cent higher at $25.47.
That helped energy stocks in the S&P 500 rally 11%, by far the biggest gain among the 11 sectors that make up the index. EOG Resources jumped 23%, Conocophillips jumped 17.5% and Phillips 66 added 13.1%, but all three remain down by nearly half for the year.
The overall S&P 500 was up 1.7%, as of 11am. The Dow Jones Industrial Average rose 375 points, or 1.8%, to 21,319, and the Nasdaq was up 1.3%.
The S&P 500 had been down as much as 0.6% earlier in the morning after the US government reported that more than 6.6 million Americans applied for unemployment benefits last week. That’s double the prior week’s number, which itself was nearly five times the prior record set in 1982.
Roughly one of every 16 Americans in the workforce has applied for unemployment benefits in the last two weeks, and economists expect the number only to rise further. That has many investors bracing for what may be the worst recession of their lifetimes.
Many investors expect markets to remain incredibly volatile until the number of new infections peaks, which would help clear the uncertainty about how bad the upcoming downturn will be and how long it will last. The S&P 500 is still down more than 22% for 2020 so far.
To help cushion the blow, Congress last week agreed on a $2.2 trillion economic aid package and the Federal Reserve promised to buy as many Treasurys as needed to keep credit markets running smoothly.
Legislators are collecting ideas for a possible new round of aid. President Donald Trump tweeted his support for a $2 trillion infrastructure package. But top Republicans in Congress say they first want to see how well their newly approved programs do.
Meanwhile, Gold prices jumped over 1% on Thursday, as record high US jobless claims for a second week in a row intensified fears of economic damage due to the coronavirus and drove investors towards the safe-haven metal. Spot gold gained 0.9% to $1,605.60 per ounce by 10:49am, while US gold futures rose 2.4% to $1,629.20.
“The reality of that ( jobless claims numbers) setting in along with the equities starting to turn lower, you get some fresh rounds of safe-haven buying in gold,” said Bob Haberkorn, senior market strategist at RJO Futures.
The number of Americans filing claims for unemployment benefits doubled from last week to a record high of 6.65 million, as more jurisdictions enforced stay-at-home measures to curb the coronavirus.
“The longer this thing drags out, the worse the situation will be in longer term. gold is an asset that should do well through all this turbulence, all the money that is being printed to combat the effects of the virus and the interest rates being dropped to zero,” Haberkorn said.