Stocks surged Wednesday following a jump in oil prices as Wall Street looks to extend the market rally to three days and recoup some of the steep losses suffered in what has been a challenging start to the year.
Stocks were again keying off action in the oil patch, with stocks carving out gains alongside a 5% jump in the price of a barrel of U.S.-produced crude to back above $30. Wall Street is closely monitoring talks in Tehran, where energy ministers from Venezuela, Iraq and Qatar were meeting with their Iranian counterpart Bijan Zanganeh on Wednesday in an effort to reach an agreement to restrain oil output and prop up falling prices, Reuters reported.
Investors, of course, hope a deal can be sealed to start the process of capping oil production and beginning the process of stabilizing prices, which have been in freefall for most of the new year, dragging down the energy complex in the process.
In morning trading, the Dow Jones industrial average was up 210 points, or 1.3%, and on track to post its first three-day winning streak since December. The broader Standard & Poor’s 500 stock index was 1.5% higher and the technology-dominated Nasdaq composite was up 1.8%.
U.S.-produced crude was rebounding from a drop yesterday, rising 5.2% to $30.54 a barrel. Oil prices are trading in a volatile pattern as investors handicap whether the move by Saudi Arabia and Russia to freeze production will get buy-in from Iran and Iraq and actually move the needle towards few barrels being produced on a daily basis.
Rising oil prices also gave European shares a big boost Wednesday. The broad Stoxx Europe 600 index jumped 2.7%, the DAX in Germany was 2.7% higher and the CAC 40 in Paris was up 3.1%.
Stocks are finally bouncing higher after getting deeply oversold. Wall Street is debating whether this rally marks the end of the tumult or is simply a short-term bounce in an ongoing down market.
“This whipsaw-like action is making it very difficult to determine the near-term direction of the stock market,” Andrew Adams of Raymond James told clients in an early-morning research note. “The bulls are taking their sweet time deciding if we have already fallen enough to create substantial buying opportunities, while the bears point to a whole host of negative items from both a fundamental and technical basis that continue to pressure the broad market.”
Still, given the long duration of what Adams refers to as a “selling stampede” and the market’s oversold condition, he says he does “hold out hope that buying demand is going to pick up here soon as stocks attempt to create yet another ‘double bottom’ or ‘W’ pattern like we saw last fall.”
Wall Street was also digesting incoming economic data for January. Housing starts fell 3.8% versus a drop of 2.8% in December. And inflation at the wholesale level last month rose 0.1%.
In Asia, stocks were mixed. The Nikkei 225 in Japan fell 1.4%. Hong Kong’s Hang Seng index slumped 1%, while mainland China’s Shanghai composite index rose 1.1%.