The stock market has finally stopped crumbling — at least for the moment.
The Dow jumped about 275 points on Friday. The S&P 500 gained 1.7%, backing away from two-year lows. The Nasdaq also advanced, rising 1.5%.
The gains help erase some of the week’s losses, though the Dow remains down nearly 300 points since Monday and 1,500 on the year.
Wall Street’s better mood was fueled by a 12% surge for oil prices and a big rebound for banks, easing the market’s two biggest headaches of late. The bounce was also driven by a sense that the recent selling may be overdone.
“We do not believe the S&P 500 sinks into a bear market,” said Sean Lynch, co-head global equity strategy for Wells Fargo Investment Institute. “The fundamentals would have to deteriorate further in order to see more material downside.”
The S&P 500 has tumbled 13% from all-time highs. It would have to be down 20% to qualify for bear status. Even the beaten-down Nasdaq has backed away from bear status, though it remains uncomfortably close.
It’s important to remember that while U.S. stocks are tanking, the American economy isn’t. Yes, growth slowed down drastically at the end of 2016. However, it’s widely expected to rebound early this year.
Investors got a fresh reminder of that on Friday when the government said retail sales rose by 0.2% in January, exceeding expectations. The news helped lift the markets higher.
Oil prices continue to play a huge role in market direction. Crude’s dive to 13-year lows on Thursday freaked investors out as cheap oil has been seen as a bad omen for the economy.
However, oil surged 12% on Friday to close at $29.44 a barrel. It was the biggest one-day gain since 2009. The reversal was fueled in part by more hopes OPEC will come to the rescue with a supply cut.
Matthew Smith, director of commodity research at ClipperData, is very skeptical about the latest OPEC talk.
“We have heard from various ministers and countries over the past few months about the potential of a production cut, but nothing has come to fruition,” he said.
Bank stocks, easily the worst performers this year, were also bouncing. JPMorgan Chase shares jumped 8% after CEO Jamie Dimon plunked down $26.6 million of his own money to buy the bank’s stock.
Deutsche Bank is also on the rise after saying it will buy back billions of its own debt. It’s a show of confidence after the bank was recently forced to repeatedly deny rumors of a liquidity crisis.