U.S. equities moved higher Tuesday — returning from a long holiday break — thanks to a meeting between oil ministers of Russia, Saudi Arabia, Qatar and Venezuela.
This raised hopes of a possible OPEC-Russia supply cut deal after a tentative agreement to freeze production at January levels was reached.
The deal isn’t final, however. It depends on other large producers to join in (Iraq and Kuwait are in agreement). And the big wildcard is what happens with Iran, which is steadfast that any production cuts should be taken from its pre-sanctions production level, not the current, diminished post-sanctions level.
Iran has long held that other OPEC countries need to make way for Tehran to return to the global oil market now that the nuclear deal has been hammered out.
In the end, the Dow Jones Industrial Average gained 1.4%, the S&P 500 moved north 1.7%, the Nasdaq Composite added 2.3% and the Russell 2000 finished the day 2.5% higher. Elsewhere, treasury bonds weakened, the dollar strengthened, gold lost 3.1% and crude oil fell 1.1% to close at $29.12 a barrel.
Consumer discretionary stocks gained 2.5% to lead the pack, with Groupon Inc (NASDAQ:GRPN) surging 41.2% after Alibaba Group Holding Ltd (NYSE:BABA) reported a 5.6% stake worth some 33 million shares. Tech hardware names Micron Technology, Inc. (NASDAQ:MU) and Qualcomm, Inc. (NASDAQ:QCOM) gained 7.9% and 4.9%, respectively, thanks to analyst upgrades.
And a few energy stocks perked up, on hopes the OPEC-Russia production cut deal becomes a reality, with Exxon Mobil Corporation (NYSE:XOM) up 0.2% to push the February $79 calls recommended to Edge Pro subscribers to a 126% gain.
Apple Inc. (NASDAQ:AAPL) surged 2.8% — closing above its 20-day moving average for the first time since early December — on reports the company has begun shopping a big 10-part debt offering to finance its shareholder capital return program.
Apple has returned $153 billion out of its $200 billion program, with $110 billion in share repurchases. This looks like the start of AAPL’s first significant uptrend since October.
Defensive telecom and utility stocks were the laggards.
Technically, the rebound was questionable. It wasn’t followed by other risk-on proxies such as the Japanese yen carry trade, crude oil futures or credit. And the leadership by small-cap stocks and transportation stocks suggests an element of short covering (a classic “squeeze” dynamic) was in play.
Indeed, the most shorted stocks in the market are up 7% from Thursday’s lows in what’s the biggest squeeze in over four months.
But with AAPL on the move and crude oil vulnerable to a rebound here, that could just be the impetus the bulls need for a nice medium-term uptrend off of Thursday’s lows.
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.
