The S&P 500 rallied 2.6% on Wednesday, as buy-the-dip efforts were emboldened by a 12% drop in oil prices ($108.88, -14.88, -12.0%). The Nasdaq Composite gained 3.6%, the Russell 2000 gained 2.7%, and the Dow Jones Industrial Average gained 2.0%.
The pullback in oil was due to a confluence of factors, including hopeful-sounding rhetoric from Russia and Ukraine in front of ceasefire talks tomorrow, the UAE vouching support for OPEC to increase production, and news that U.S. officials want Venezuela to increase oil exports to the States in exchange for an ease in sanctions.
A 12% decline for a commodity that is still up 45% for the year was the type of drawdown needed to revive risk sentiment, even if the macro environment was still inflationary. It’s too early to know if oil peaked for the near term, but there was hope that consumers could start to see relatively lower prices at the gas pump.
Stocks that were hit the hardest this month were among the biggest gainers today, particularly those in the S&P 500 information technology (+4.0%), financials (+3.6%), communication services (+3.5%), and consumer discretionary (+2.9%) sectors.
The energy sector (-3.2%), on the other hand, fell 3% amid the weaker oil prices while the utilities sector (-0.8%) was the only other sector that closed lower. Both sectors remained higher for month, so there was likely some profit-taking activity in the groups.
Bumble ( BMBL 23.64, +6.98, +41.9%) was an individual standout, with shares soaring 42% on better-than-feared earnings results.
Besides the scope of today’s gains, the risk-on mindset was corroborated by declines in the CBOE Volatility Index (32.45, -2.68, -7.6%), the U.S. Dollar Index (98.00, -1.06, -1.1%.), gold prices ($1987.20, -60.10, -2.9%), and Treasury prices.
To be fair, Treasuries might have been pressured by an acknowledgement that one trading day doesn’t remove inflationary pressures and that the Fed is still on track to hike rates multiple times this year, starting next week. On a related note, the $34 billion 10-yr Treasury note auction received lukewarm demand.
The 2-yr yield increased four basis points to 1.67%, and the 10-yr yield increased eight basis points to 1.95%.
Reviewing Wednesday’s economic data:
- Job openings decreased to 11.263 million in January from a revised record-high of 11.448 million (from 10.925 million) in December.
- The weekly MBA Mortgage Applications Index rose 8.5% following a 0.7% decline in the prior week.
Looking ahead, investors will receive the Consumer Price Index for February, the weekly Initial and Continuing Claims report, and the Treasury Budget for February on Thursday.
- Dow Jones Industrial Average -8.4% YTD
- Russell 2000 -10.2% YTD
- S&P 500 -10.3% YTD
- Nasdaq Composite -15.3% YTD
Overseas:
- Europe: DAX +7.9%, FTSE +3.3%, CAC +7.1%
- Asia: Nikkei -0.3%, Hang Seng -0.7%, Shanghai -1.1%
Commodities:
- Crude Oil -14.88 @ 108.88
- Nat Gas -0.02 @ 4.55
- Gold -60.10 @ 1987.20
- Silver -0.84 @ 25.92
- Copper -0.18 @ 4.56