(March 10): A rebound in US stocks managed to hold onto gains on Tuesday as Group of Seven (G7) nations asked their main energy agency to ready scenarios to deploy oil reserves if necessary.
The S&P 500 Index rose 0.4% as of 11.16am in New York, with the benchmark poised to climb for a second-straight session. The Nasdaq 100 Index advanced 0.6%, building on Monday’s 1.3% gain, as tech stocks — including Nvidia Corp, Western Digital Corp and Micron Technology Inc — extended gains amid a risk-on mood. However, an equal-weighted version of the S&P 500 — which gives Dollar Tree Inc the same heft as Apple Inc — drifted lower. Wall Street’s fear gauge, the Cboe Volatility Index hovered around 23 after touching the highest since April in the prior session.
“Risk mood is improving,” said Dec Mullarkey, managing director at SLC Management. “The prospects of stabilising energy supply have been well received.”
Earlier, the G7 asked the International Energy Agency to prepare scenarios for the release of emergency oil stockpiles. The G7 tasked the agency with studying the volumes that could be released, French Finance Minister Roland Lescure told reporters in Paris.
Brent crude fell 11% to US$88 a barrel, extending losses after Monday’s wild trading.
The last hour of Monday’s session saw key indices flip to green after President Donald Trump hinted the war in Iran could be nearing a conclusion. But recent reports have been testing traders’ conviction in a potential end to the war.
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Earlier, the biggest refinery in the United Arab Emirates (UAE) halted production after a drone strike. Adding to concerns, Iran state media reported an explosion of an oil tanker near the UAE.
Meanwhile, the Pentagon struck a more aggressive tone than Trump on the war, saying that it is conducting the most intense day of strikes against Iran and will not give up until the Islamic Republic is defeated. The comments suggest the campaign, which started on Feb 28, still has more room to run.
See also: Wall Street climbs as Trump hints war could be over soon
Monday’s Trump headlines on a potential end to the war “appeared right on time given the market decline”, said Tom Essaye of the Sevens Report. Essaye added that there were reasons to be skeptical over a potential TACO — Trump Always Chickens Out — trade being viable currently.
“The de-escalatory remark from Trump was welcomed by markets, but for yesterday’s TACO bounce to signal an end to this decline, we’ll need more than just a one-sided statement,” Essaye said.
Kathleen Brooks, a research director at XTB, expects oil prices to remain volatile. Comments from Trump “may not be enough to permanently erase a risk premium that has been built into the oil price in recent days, especially since the Strait of Hormuz remains closed,” she said.
Amid the continuing conflict, traders are also readying themselves for a fresh look at inflation with the consumer price index, which is due on Wednesday. Also due this week is the personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation gauge.
“On the surface, these prints are backward-looking,” said Daniela Hathorn, senior market analyst at Capital.com. “Yet in the current environment of rising energy prices, heightened geopolitical tensions and signs of labour-market softening, they are unlikely to be dismissed as ‘out of date’. Instead, they could prove pivotal in shaping expectations for the Federal Reserve’s next move.”
Among individual stock moves, Hewlett Packard Enterprise Co slid after reporting slightly weaker-than-expected revenue while Teladoc Health Inc jumped after Deutsche Bank upgraded the virtual healthcare provider to buy.
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