Stocks Recover from the Oil Slick

Stocks staged a solid performance Wednesday, rallying +2% to +3% after a manic, two-day price decline in oil that rattled investors and sparked a 5% correction in major market averages.

It feels like the two day historic plunge in oil pricing earlier this week an epic exercise of capitulation selling. This was clearly complicated by the expiration of the May contract on Tuesday afternoon, and the lack of storage capacity creating major issues with taking physical delivery.

The Dow Jones Industrial Average (^DJI) rallied 456.94 or +2% to settle at 23475.82 after declining -5% the prior 2 days. The Dow was led by gains from McDonald’s Corp (MCD) at +$8.90 to $186.48, Apple Inc (AAPL) at $276.10, or +$7.73, and Visa Inc. (V) at $166.59, +$6.06.

The only decliner for the Dow was Boeing Co. (BA) at $134.97 -$1.36.

The S&P 500 (^SPX) gained 62.75 points, or +2.3% to settle less than a point shy of the 2800 threshold at 2799.31. The S&P had lost -138.00, or -4.8% Monday and Tuesday. The S&P 500 remains +25% above the March 23 lows and is 1% from its 50 day moving average of 2830.

All 11 sectors of the S&P 500 logged gains led by Information Technology, +3.9%, Energy, +3.6% and Utilities, +3%.

The NASDAQ Composite (^IXIC) continued its outperformance of late, with a +2.8% gain to settle at 8495.38. After losing -386.91 points the first two days this week, The Nasdaq recovered over half of that drop, gaining +232.15 on Wednesday.

The Nasdaq also regained its 200 day moving average, now having closed above that benchmark 5 of the last 7 trading sessions. The 200 day MA is at 8410.

Market internals lagged the averages a bit, with advancing issues leading decliners by less than 2½ to 1. The week began with decliners leading advancing issues by -3½ to 1 and -4 to 1, respectively. We would like to see market internals broaden out if the market is to extend Wednesday’s recovery rally.

The Early Line

Market averages have been bouncing between fractional gains and losses all morning. Crude oil trading to just below $16.00 is a positive, while the weekly unemployment claims report at 8:30 am will likely push the aggregate number above 25 million new filers over the last 4 weeks.