The bulls pulled stocks back from the precipice on Friday, lifting the S&P 500 away from super-critical support near the 1,800 level. Not only is this associated with the 200-day moving average, but it’s the lower end of a support zone that’s held large-cap stocks aloft since early 2014.
Despite the rise, driven by the largest percentage-point gain in crude oil since early 2009, the Dow Jones Industrial Average wasn’t able to climb back over the 16,000 level. The bears, it seems, are still in control.
This despite aggressive comments from Bank of Japan officials overnight that an emergency policy meeting could be held should market volatility continue, with Japan’s Nikkei down roughly 17% from its high on Feb. 1.
In the end, the Dow Jones Industrial Average gained 2%, the S&P 500 gained 2%, the Nasdaq Composite gained 1.4%, and the Russell 2000 gained 1.9%. Treasury bonds weakened, the dollar was stronger, gold pulled back after a strong rally on Thursday and West Texas Intermediate crude gained 11% to close at $29.11.
The rise in energy prices was spurred by renewed hopes of coordination on production cuts, as well as optimism surrounding continued U.S. rig count declines. Rig counts declined to 541 vs. 571 last week — a 5.3% drop, marking the eighth week of declines.
Groupon Inc (NASDAQ:GRPN) was a highlight, rising 29% on stronger Q4 results and strong guidance. Payments processor Square Inc (NYSE:SQ) gained 8% after a 9.99% stake was disclosed by Visa Inc (NYSE:V), which gained 2.9%.
Financial stocks led the way with a 4% gain thanks to an 8.3% surge in JPMorgan Chase & Co. (NYSE:JPM) after CEO Jamie Dimon purchased 500,000 shares for more than $26 million, his first meaningful allocation since the London Whale fiasco four years ago. Shares gapped at the open to reverse a scary looking breakdown on Thursday.
But with bank stocks getting hit on a combination of rising energy sector default fears and the drag from lower long-term interest rates (with Japan and Europe cutting rates deeper into negative territory) this looks like a temporary distraction on the way to lower prices.
Indeed, the broad market reprieve looks like it will be temporary as the negative catalysts pile up. From a suddenly hawkish Federal Reserve to worries about the Zika virus, Asian turmoil, the return of the Eurozone debt crisis, weak corporate earnings and the risks of the latest obsession with negative interest rate policies, investors have a lot on their minds.
It’s no wonder then that gold and silver have been leading the way higher, with the Gold Trust SPDR (NYSEARCA:GLD) up 5.4% for the week, lifting the February $105 GLD calls recommended to Edge Pro subscribers to a 658% gain. Precious metals stocks have also been on a roll, with a basket of stocks recommended to Edge subscribers up 35% for the month-to-date, including a 73% gain in Kinross Gold Corporation (USA) (NYSE:KGC).
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