Crude prices rose and a gauge of global equities broke out of a three-week trading range on Wednesday as investors bet on a rapid recovery from the coronavirus-induced recession.
Oil prices climbed 3%-4% on signs of improving demand and a drawdown in U.S. crude inventories, while a surge in Facebook Inc. and Amazon.com Inc. to record highs lifted the Nasdaq to within 5% of its all-time high.
In Toronto, the S&P/TSX composite index unofficially closed up 112.15 points, or 0.75%, at 14,997.63.
The energy sector climbed 5.6%, while the financials sector gained 1.4%. Industrial stocks rose 1.9%.
The materials sector, which includes precious and base metals miners and fertilizer companies, slipped 1.2%.
The three major averages on Wall St notched their fourth gain in five sessions on Wednesday as investors again bet on a swift economic recovery from coronavirus-driven lockdowns and the potential for more stimulus measures from the Federal Reserve.
The S&P 500 stands at a two-month high and was briefly above its 100-day moving average, a closely watched technical indicator that has acted as a resistance level.
Gains were broad-based. The small-cap Russell 2000 index , which usually leads gains out of a recession, outperformed the large-cap indexes.
Minutes from the Federal Reserve’s most recent policy meeting showed the central bank pledged to act as appropriate to support the economy until it is on track to recovery, a sentiment that Fed Chair Jerome Powell has voiced in recent days.
“We have way lower interest rates for the foreseeable future, so that effects the multiple that we have to buy discounted stocks at,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh. “And if you give yourself a little bit more time, is it crazy to think everything is going to come back in two years and you are going to hold it three to five years?”
Still, with economic data likely to be dismal in the coming weeks, there is concern that stocks may have gotten ahead of themselves, with the S&P up nearly 33% from its March 23 closing low.
Unofficially, the Dow Jones Industrial Average rose 1.52% to end at 24,575.9 points, while the S&P 500 gained 1.67%, to 2,971.61. The Nasdaq Composite climbed 2.08% to 9,375.78.
U.S. Treasury yields were little changed and gold edged higher, but gains were limited as risk appetite improved.
The markets are expecting economic recovery sooner rather than later, though there is a risk the slowdown isn’t as temporary as some think, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“There’s a view that as the economy reopens there hasn’t been, so far, a resurgence in the hospitalization rates and that perhaps some of the ‘worst-ever’ data that we’ve seen will soon be behind us,” Arone said.
MSCI’s gauge of stocks across the globe gained 1.40% to within 1 point of 500, after the benchmark was unable to climb past 495 the past three weeks.
The pan-European STOXX 600 index rose 0.98% to close just shy of a three-week high, led by the tech, chemicals and energy sectors.
Two-thirds of 223 fund managers surveyed by Bank of America reckon recent equity gains indicate a bear-market rally.
Federal Reserve policymakers re-upped a pledge to keep interest rates near zero until they are confident the U.S. economy is on track to recovery, a detailed summary of their most recent policy-setting meeting shows.
The 10-year Treasury notes fell 2.8 basis points to yield 0.6834%.
Oil prices climbed over 3% on Wednesday on signs of improving demand and a drawdown in U.S. crude inventories, but gains were capped by worries over the economic fallout from the coronavirus pandemic and weak refining margins.
Brent crude settled $1.10, or 3.2%, higher at $35.75 per barrel while the new front-month July U.S. crude futures ended up $1.53, or 4.8%, at $33.49. Both benchmarks rose more than 5% during the session.
Last month, the May U.S. crude contract sank well below zero ahead of expiry as storage filled rapidly.
U.S. crude inventories fell by 5 million barrels last week, Energy Information Administration data showed, while stocks at Cushing, Oklahoma, delivery hub for U.S. futures dropped by 5.6 million barrels.
“What this report confirms is that your worse nightmare - that we’re going to run out of storage space - is probably not going to happen,” said Phil Flynn, senior analyst at Price Futures Group.
Fuel demand has grown as lockdown curbs have eased worldwide, and initial shipping data show strong compliance with production cuts from the Organization of the Petroleum Exporting Countries and its allies.
The euro extended gains on Monday’s French-German proposal for a 500 billion euro common fund that could move Europe closer to a fiscal union.
The euro rose 0.59% to $1.0985 and the dollar index fell 0.445%. The Japanese yen strengthened 0.22% versus the greenback at 107.50 per dollar.
U.S. gold futures settled up 0.4% to $1,752.10 an ounce.
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