FRIDAY, March 29, 2024
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U.S. stocks rebound as oil prices stabilize

U.S. stocks rebound as oil prices stabilize

U.S. stocks rebounded Wednesday after a two-day sell-off as oil prices stabilized.

The Dow Jones industrial average jumped 419 points, or 1.8%, at the open. The blue-chip index had erased nearly 1,000 points over the past two days. The Standard & Poor's 500 index and the tech-heavy Nasdaq both surged 2.1%.

West Texas intermediate crude oil, which sold for less than $0 a barrel earlier in the week, hovered near $11 on Wednesday morning on its June contract. Brent crude, which hit an 18-year low on Tuesday, was up 5.3%, to $20.32 a barrel on Wednesday. The improvement remains a fraction of the $50 or so needed for a producer to make money.

"The pendulum is swinging from the opposite extreme of the peak oil craze about 10 years ago," said David Trainer, chief executive of investment research firm New Constructs. "This price slump is definitely a reaction to the fact that the world is running out of places to store the excess supply of oil. But, it is still a knee jerk reaction -- as soon as the economy gets going again, oil demand will bring prices closer to normal."

The oil crash comes amid a sharp decline in demand as the coronavirus pandemic has slashed business and social activity around the globe. That's created a glut that's straining storage capacity.

President Donald Trump tweeted Tuesday that he would "never let the great U.S. Oil & Gas Industry down," adding that he instructed Energy Secretary Dan Brouillette and Treasury Secretary Steven Mnuchin to make funds available for the struggling sector.

But analysts were skeptical of how much help Trump and his administration could offer. When oil sells at $0 or below - and it went as low as negative $30 over the two days - that means producers have so many barrels stockpiled, they're paying consumers to take it off their hands. It's an ominous sign for the economic recovery, analysts say.

"The supply-and-demand balance for oil is so out of whack that global demand cannot grow fast enough and suppliers can't cut supply quickly enough to put things back in order," said Frank Verrastro of the Center for Strategic and International Studies. "There is so much oil sloshing around the world and so few people using it that there is no remedy. Even President's Trump toolbox looks bare."

The oil crisis emerged as U.S. companies already are dealing with one of the most challenging environments in their histories. Companies have begun a critical earnings season that will test how they are weathering the public health lockdown and what their outlook is for the remainder of the year.

Meanwhile in Washington, the Senate passed a $484 billion relief package to replenish a small-business loan program that's been overrun by demand and to devote more money to hospitals and coronavirus testing. The House could pass the bill as soon as Thursday.

Global exchanges also advanced Wednesday. The German DAX gained about 1% and London's FTSE climbed 1.4%. Japan's Nikkei was flat most of the day, but lost 0.7% at the day's close and the HSI in Hong Kong did the opposite, riding gains for most of the day only to give back all but 0.4% just before the close of business. India's BSE Sensex was the big gainer, up 2.4%.

 

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