Dow Jones Rises Triple Digits as Oil Returns

Advertisement

Amid a flurry of fourth-quarter earnings activity, U.S. equities pushed higher on Thursday on crossing headlines that maybe, just maybe, OPEC and Russia could warm up to the idea of cutting production to stabilize prices.

Even if there is no validity to the chatter, it helped crude oil anyway by pressuring all the shorts — many of which panicked and covered.

In the end, the Dow Jones Industrial Average gained 0.8%, the S&P 500 went up 0.6%, the Nasdaq Composite finished 0.9% higher and the Russell 2000 ended the day with a 0.1% gain. Overall, treasury bonds strengthened, the dollar weakened, gold ended slightly lower and oil gained 4.2% to close at $33.64 a barrel.

1-28-16-DJI copy

Oil initially spiked on comments from Russian Energy Minister Alexander Novak, who said Saudi Arabia had proposed production cuts of up to 5% by each oil producing country. He also said there was a proposal for a February meeting between OPEC and non-OPEC countries at the minister level.

But other OPEC delegates said no such meeting has been planned, but that a product cut had been floated by Venezuela and Algeria. Even if OPEC and Russia can’t organize anything, watch for possible supply disruptions out of Libya (ISIS is moving in on oil infrastructure) and Nigeria (where a new government is launching an anticorruption campaign against foreign oil producers).

No surprise then that energy stocks led the way higher with a 3.2% gain. Nike Inc (NYSE:NKE) was a bright spot, rising 2.7% to push the Feb $60 calls recommended to Edge Pro subscribers on Jan. 19 to a gain of 153%.

Thanks to strong Q4 results and impressive user growth metrics, Facebook Inc (NASDAQ:FB) gained 15.5%. Athletics apparel maker Under Armour Inc (NYSE:UA) gained 22.6% on an earnings beat driven by strong revenue as well as solid forward guidance. And troubled machinery maker Caterpillar Inc. (NYSE:CAT) gained 4.7% on an earnings beat despite soft revenues thanks to 2016 earnings guidance that was 14% above the Street estimate.

On the downside, eBay Inc (NASDAQ:EBAY) lost 12.5% on inline results but weak guidance. Qualcomm, Inc. (NASDQ:QCOM) lost 8.3% on lingering royalty concerns.

After the close, Amazon.com, Inc. (NASDAQ:AMZN) was slammed 11.5% after reporting an earnings miss of $1 a share vs. the $1.61 that was expected. Revenues missed as well at $35.7 billion vs. the $35.9 billion expected. Forward guidance was also weak, with Q1 operating income expected to be between $100 and $700 million.

After a couple quarters of surprising profitability, the online retail giant is once again hamstrung by worries its exponential growth isn’t delivering the earnings power promised.

Microsoft Corporation (NASDAQ:MSFT) gained 3.4% thanks to a top- and bottom-line earnings beat. Earnings came in at 78 cents per share vs. the 69 cents analysts were expecting. Highlights included increased Office 365 subscribers, a 29% jump in Surface sales, and a record 48 million Xbox Live monthly subscribers.

1-28-16-DG copy

And finally, on the economic front, durable goods missed expectations registering a 5.1% monthly drop in December — well below expectations for a 0.2% rise. Ex-transportation orders were also weak, dropping 1.2%. Most worryingly, core orders (less defensive equipment and aircraft) fell 4.3% following a 1.1% decline in November.

For now, with technical indicators continuing to recover from the deep oversold condition seen last week, the rebound rally looks set to continue as oil production cut rumors — as well as ongoing hints of fresh stimulus from foreign central banks and a pause in the Federal Reserve’s rate hike campaign — provide the catalyst necessary to encourage bargain buyers.

1-28-16-INX copy

I’m looking for the S&P 500 to rally off of support near 1,900 to test rounded top resistance near 2,050 — an 8.3% gain from here. Chinese equities in particular look ready to bounce should this happen, with the iShares China Index (FXI) already up 3.7% for Edge subscribers as Beijing works to quell currency and equity market volatility in the Middle Kingdom.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/01/dow-jones-up-triple-digits-as-oil-rises/.

©2024 InvestorPlace Media, LLC