Stocks Reach Session Highs as Crude, Energy Rally
New York (Jan 14) US stocks jumped on Thursday as crude oil recaptured a level of $31 a barrel, triggering a rally in the energy sector.
The S&P 500 added 1.9%, the Dow Jones Industrial Average was up 1.7%, and the Nasdaq gained 2.2%. The Nasdaq had fallen 1% earlier in the session.
Crude oil prices jumped in a long-overdue rally on Thursday after testing fresh 12-year lows earlier in the week. West Texas Intermediate crude oil was up 2.6% to $31.27 a barrel. Commodities have been under pressure since beginning of the year as oversupply concerns persisted.
The energy sector was the best performer on markets. Major oilers Exxon Mobil (XOM - Get Report) , Chevron (CVX - Get Report) , ConocoPhillips (COP - Get Report) and Royal Dutch Shell (RDS.A - Get Report) climbed, while the Energy Select Sector SPDR ETF (XLE) added 4.1%.
Even so, fears over the Chinese economy, oil prices at multi-year lows, and the devastating start to the year for Wall Street remained present for investors.
The equity reaction is "significantly bigger than expected and that's injecting fear into that situation," Dave Louton, professor of finance at Bryant University, told TheStreet. "Will it really take us into a sustained bear market period? I don't know, but it certainly could because we're coming off of weakness. We're not at a period of strength where we can just absorb that kind of upheaval without significant risk of it essentially causing the upward movement of the market to come unglued."
Other analysts agreed that we could be on track for bear market territory, wherein major markets fall 20% from their 52-week highs.
"I think this is just the beginning of the sell off that we're seeing," said Joshua Mahony, a market analyst at IG, based in London. "Quite frankly, no one knows how far [the selling] is going to go and no one even knows why [investors] are selling."
U.S. stocks got hammered on Wednesday, pushing the already beleaguered market even further into correction territory. The S&P 500 closed at its lowest level in three months. U.S. stocks suffered their worst first week to a year in history last week as fears over Chinese economic weakness spooked Wall Street and global markets. Nearly $3.2 trillion has been wiped off global markets since the beginning of the year.
A Federal Reserve official suggested Thursday that recent selloffs in crude oil could hinder the central bank from hiking rates further.
"Once oil prices stabilize, headline inflation should return to the Federal Open Market Committee's inflation target of 2%, although it may take longer than previously thought," said St. Louis Fed President James Bullard, a voting member of the Federal Open Market Committee.
Bullard also said inflation expectations are falling as crude oil fails to find a bottom, a worrying trend. The Fed has struggled with one of its mandates -- to fulfill its goal of 2% inflation -- as crude oil pressured producer and consumer prices.
Initial claims for U.S. unemployment benefits rose 7,000 to 284,000 in the past week, though remained near multi-year lows as the labor market continued to tighten. Four-week jobless claims, which averages out week-to-week bumps, climbed 3,000 to 278,750, its highest level since July.
Brown-Forman (BF.B) announced plans to sell its Southern Comfort and Tuaca liqueur brands to Sazerac, maker of Fireball, for $534.5 million. Kentucky-based Brown-Forman said the deal, expected to close March 1, will allow it to focus on its whiskey brands such as Jack Daniel's.
JetBlue (JBLU) suffered a network outage on Thursday afternoon that disrupted customers' travel plans across the U.S. The airline said while there were a number of flights still on track for departure, many would be delayed or cancelled. Network issues affected major airports including LAX, JFK and Logan International Airport in Boston.
Best Buy (BBY) tumbled 11.5% after cutting its sales outlook for its current quarter. The electronics chain said it expects domestic sales to fall 1.5%, down from previous guidance for flat sales, due to weaker cellphone sales over the holidays.
JPMorgan (JPM) climbed 2% after fourth-quarter profit rose on a better-than-expected performance in its investment banking business. The bank earned $1.32 a share, up from $1.19 a share a year earlier and better than the $1.25 a share analysts had expected.
GoPro (GPRO) tumbled 24% after announcing plans to cut 7% of its workforce as it continues to face weakening demand and disappointing sales. The action camera maker expects to spend $5 million to $10 million in layoff costs. GoPro also said it expects fourth-quarter sales of $435 million, below estimates of $521 million.
Goldman Sachs (GS) is planning to cut up to 10% of its fixed-income traders and salespeoples later this quarter, according to The Wall Street Journal. The job cuts are double the annual 5% enacted in March to make way for new hires. Cuts will be focused in its debt, currencies and commodities division, areas with less opportunity since new capital regulations were introduced.