Stocks, Oil Rally; Cold Snap Supports Energy Demand
Oil prices and world stock markets jumped on Friday, providing some relief to bruised investors as frigid weather across the United States and Europe boosted energy demand.
Brent crude oil, which tumbled in recent weeks on worries about oversupply, settled 10 percent higher and above $32 a barrel in one of the biggest daily rallies ever. Traders cashing in short positions lifted prices along with the higher short-term demand.
The benchmark S&P 500 U.S. equity index rallied 2 percent and registered its first positive week of 2016 thanks to the bounce in oil. Energy led the day's gains, with Exxon Mobil (XOM) ending up 3.3 percent and the S&P energy index rising 4.3 percent.
"I don't think anyone really believes we've seen the bottom," said Warren West, principal at Greentree Brokerage Services in Philadelphia. "It's a nice bounce, but it's still trading in the range of those August lows and you can't really call it a rally."
After dropping earlier this week to 2014 lows, the S&P 500 has recovered in the past two sessions to end the week 1.4 percent higher. It is still down 6.7 percent in 2016 after the brutal selloff that began at the start of the year.
The Dow Jones industrial average rallied 1.33 percent to finish the session at 16,093.51 while the S&P 500 surged 2.03 percent to 1,906.9. The Nasdaq Composite jumped 2.66 percent to 4,591.18.
Apple rose 5.32 percent to $101.42 and gave the biggest boost to the S&P 500 and the Nasdaq. Despite widespread concerns about potentially weak iPhone demand, Piper Jaffray (PJR.SG) recommended buying Apple's shares heading into its quarterly results next week.
The MSCI All Country World Index rose 2.7 percent, while Europe's pan-regional FTSEurofirst 300 index closed 3-percent higher.
Equities have fallen with oil prices amid worries over global growth. U.S. S&P 500 earnings are forecast to post a second straight quarterly profit decline.
Investors hoping equities can sustain their recent bounce will watch the U.S. Federal Reserve's policy meeting next week for signs the central bank may slow the path of interest rate hikes.
Brent rose 10 percent to settle at $32.18, well above this week's low of $27.10, while U.S. crude rose 9 percent to settle at $32.19.
DOLLAR FIRMS, BONDS FALL
Increased expectations of monetary easing by central banks in Europe and Japan lifted the U.S. dollar, along with gains in global equities and oil prices.
Bank of Japan Governor Haruhiko Kuroda said there is further room for the bank to expand its quantitative easing program if inflation continues to wane.
The comments came a day after European Central Bank President Mario Draghi said the bank would need to review its policy in March, which was read by markets as a promise of more easing.
The dollar rose 0.9 percent to 118.75 yen, while the euro fell below $1.08 for the second time in as many days, nearing a two-week low.
U.S. Treasuries prices slumped as the resurgence in oil and stock prices sparked a fresh wave of selling of safe-haven government debt.
Benchmark 10-year Treasury notes were down 9/32 in price to yield of 2.052 percent, up 3 basis points from late on Thursday. The 10-year yield climbed from 1.939 percent on Wednesday, the lowest since early October.
In the precious metals market, gold fell as equities rallied. Spot gold was down 0.6 percent at $1,095.16 an ounce.
(Additional reporting by Noel Randewich in San Francisco and Abhiram Nandakumar in Bengaluru; Editing by Bernadette Baum, Dan Grebler and Nick Zieminski)
