Scrooge has left the building.
Stocks soared out of the gate Thursday as the stars aligned for two of the market’s biggest divers: the Federal Reserve and oil.
The Dow shot up 280 points, a day after it and the S&P 500 both experienced their biggest gains of the year. After taking a beating earlier this month, investors may finally be getting that Santa Claus rally they wished for.
Here’s why investors feel jolly:
A generous Fed: The Fed was in a particularly giving mood Wednesday when it announced it was going to take its sweet time raising interest rates.
The central bank said in a statement it would be “patient in beginning to normalize the stance of monetary policy.” It also kept closely-watched language saying rates would stay low for a “considerable time,” which investors took as clear signal that rates won’t rise until next summer or later.
“The Fed seems to be very cognizant of the economic weakness overseas and the extreme drop in oil prices,” said Doug Roberts of Channel Capital Research.
Oil: For much of December, the ugliness in the market seemed to stem from spiraling oil prices. Sure, it’s a good thing for the consumer economy, but investors began to worry that the American energy boom, which has been an economic powerhouse since the recession, could come under threat as a result.
The price of oil perked up a bit and was trading at $56 per barrel Thursday afternoon, and investors ran with the news (they fell below $55 earlier this week.)
Energy stocks, including the big guys like Exxon Mobil and Chevron, got a nice bounce, although the best performer in the S&P 500 is Oracle, which reported strong earnings Wednesday afternoon.
But Michael Block, Chief Strategist at Rhino Trading Partners, isn’t taking the oil bait for now, and noted that oil had drifted off its earlier highs.
“I’ve seen this trap before,” he wrote in a morning note. “The tremors are accelerating and that has me concerned short term even if everything’s gonna be all right in the intermediate to longer term.”
