It was another wild day on Wall Street as stocks rallied and crude oil went parabolic.
Stocks in the US gained more than 2% across the board and crude oil prices rose 10% in their biggest one-day gain since October 2008.
In the final hour of trading, stocks looked like they were going to collapse again but quickly bounced back and moved to nearly session highs into the close.
First, the scoreboard:
- Dow: 16,655, +370, (2.3%)
- S&P 500: 1,988, +47, (+2.4%)
- Nasdaq: 4,12, +115, (+2.4%)
And now, the top stories on Thursday:
- We got some good news about the US economy on Thursday. The second estimate of second quarter GDP showed the economy grew at a pace of 3.7% in the second quarter of the year, better than the 3.2% pace that was expected and way better than the 2.3% pace initially estimated by the BEA last month. The BEA said the upward revision reflected an upturn in exports, an acceleration in personal spending, as well as an increase in state and local government spending.
- In a note to clients following the report, Ian Shepherdson at Pantheon Macro said that the lacklustre first quarter, that saw the economy grow up 0.2% is now, “very clearly seen to be a weather hit and the net impact of the crash in oil prices has minimal.” Shepherdson added that the big upward revision in Q2 GDP has two big lessons: advance GDP numbers are more or less useless and real-time “tracking” measures of GDP — like the Atlanta Fed’s — are even worse.
- Crude oil prices went absolutely parabolic on Thursday, rising as much as 10% in the commodity’s biggest single-day gain since October 2008. The price of West Texas Intermediate crude oil, which earlier this week fell below $US38 a barrel, topped $US42 a barrel on Thursday. In an afternoon note to clients, Peter Tchir at Brean Capital said that the move in oil should remind markets of 2 things: volatility isn’t going anywhere, and there is a reason the Federal Reserve thinks the impact on inflation from a decline in oil prices is transitory.
- Also in oil news, a report from The Wall Street Journal on Thursday afternoon said that Venezuela has called on other OPEC members to hold an emergency meeting in cooperation with Russia. OPEC, the 12-member oil cartel that includes oil producing giants like Saudi Arabia, has been producing more oil than its official target this year as its members struggle to balance government budgets amid the more than 50% crash in oil prices.
- In the labour market, initial jobless claims fell more than expected last week, totaling 271,000 — down from 277,000 — while the 4-week average of claims ticked up slightly but remains near post-crisis lows. Cheng Chen at TD Securities said in a note to clients following the report that, “Even though this report will have no bearing on next week’s payrolls report, the constructive trend in claims in recent weeks suggests that the positive labour market trend is continuing.”
- Stocks may have fully recovered from their plunge earlier this week and then some, but the technical damage is still leading the S&P 500 towards a fabled “Death Cross” — a technical indicator — perhaps as soon as Friday. But as the folks at Bespoke Investment Group noted, the S&P 500, on average, does better than normal in the 6 months following this cross.
- As for other indicators investors might be looking at amid the market chaos, Bloomberg Businessweek’s cover this week is covered in bears. Do with that what you will.
- Meanwhile, folks are still talking about Ray Dalio’s big note from earlier this week on the end of a world debt supercycle and its impacts on future global growth and the trajectory of Fed policy. Cullen Roche at Pragmatic Capitalism argued that contrary to Dalio’s assertion that we’re “nearing” the end of a supercycle, the US actually saw its cycle peak in 2007. Roche wrote, “The debt cycle is extremely disjointed in this market cycle. We’re seeing deleveragings in Europe and the USA, but Asia has been on a different page for a long time. And we’re starting to see signs that the pages are turning there. Clearly, this is bad news for China, but it doesn’t necessarily spell doom in the USA.”