After a mixed session to kick off the week, U.S. stocks, bouyed by a rally in the oil patch, surged higher Tuesday as investors gauge the market’s next move amid a recent stall in momentum after a sizable rally off of the lows in February.
At midday, the Dow Jones industrial average, which is riding a two-week losing streak and tumbled almost 35 points Monday, was up more than 200 points, or 1.1%. The broader Standard & Poor’s 500 stock index is 1% higher and the Nasdaq composite is up 1%.
Stocks are trying to find their footing after a big rally that has fizzled out in recent weeks amid a weak first-quarter earnings season, continued volatile trading in the oil patch, uncertainty tied to the November presidential election and a stock market that again is trading at above-average valuations.
Heading into today’s trading, earnings for the S&P 500 are on track to contract 5.5% in the first-quarter, the third straight quarter of negative growth. Wall Street is betting on an earnings recovery in the second half of the year.
The stock market appears to be benefiting from its ability to hold key support levels in recent sessions, prompting buying from investors, says Gary Kaltbaum of money-management firm Kaltbaum Capital Management.
Overall, rebounding oil prices in recent months have given the stock market a lift, but in recent days trading in the crude pits has become volatile, with the price of a barrel of U.S.-produced crude swinging in and out of postiive territory on a daily basis. On Tuesday at 11 a.m. ET, U.S. crude was fetching $44.22 per barrel, up 77 cents, but was down as much as 41 cents to $43.03 and as high as $44.38.
Oil traders are trying to gauge the longer-term impact of the production bottleneck caused by the wildfires in Western Canada that has taken more than 1 million barrels of oil off line each day, as well as other production outages around the world.
Investor sentiment also got a lift from rising optimism from small business owners in April, topping March’s already upbeat reading.
“The NFIB (small business) survey moved higher, with business expectations rising over the short term,” says Quincy Krosby, market strategist at Prudential Financial.
The U.S. dollar, after an earlier rally, is basically unchanged against a basket of other world currencies, after rising for five straight days, a shift towards a weaker dollar is deemed as bullish for stocks. A strong dollar is a negative for U.S. multinationals as it makes the prices of their products sold abroad more expensive, which hurts sales and weighs on profits. After a strong dollar for the better part of a year, the dollar had been weakening, giving stocks a lift, before the more recent strength.
Stocks were mostly higher around the world. In Asia, Japan’s Nikkei 225 rose 2.2%, Hong Kong’s Hang Seng index was 0.4% higher and shares of mainland China’s Shanghai composite closed virtually unchanged.
In Europe, shares were getting a lift after Credit Suisse, a bank, despite a quarterly loss said its wealth management business saw improvement, which pushed the stock up around 5% and boosted investor sentiment. The broad Stoxx Europe 600 index was 0.5% higher.