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DOW + 421 = 17,778
SPX + 48 = 2061
NAS + 104 = 4748
10 YR YLD + .05 = 2.20%
OIL – 1.88 = 54.59
GOLD + 9.00 = 1198.90
SILV + .13 = 15.98
If you were waiting for confirmation, you got it. The major indices went through about 7 days of doom and gloom. Maybe this has something to do with the Federal Reserve’s FOMC statement yesterday. The central bank said in its official statement Wednesday it would “be patient†in deciding when to start raising interest rates from near zero. But then it added that it sees “this guidance as consistent with its previous statement†pledging to keep rates very low for “considerable time.†When asked what “patient†meant, Chairwoman Yellen said the Fed would not begin hiking rates for “a couple†of meetings. Pressed further, she confirmed “a couple†means two. But I’m not sure whether it was hawkish or dovish; more likely it was just a continuation.
Here’s my guess and it is only a guess because I don’t know and probably nobody knows. My guess is that a lot of money has come out of oil lately and now that money is moving back into stocks. It’s the buy on the dip mentality, with a little sector rotation on the side. Whatever it was, it was the best day for the S&P 500 this year. The Dow had its biggest gain in 3 years. Not enough to take out the old highs but back within striking distance.
The MSCI All-Country World Index gained 2.18% and emerging-market stocks surged 1.8%. The STOXX Europe 600 Index advanced 3%, the most in three years. Treasuries moved lower, pushing yields higher. Oil slumped 3.2% after wiping out a 4% rally.
Goldman Sachs released a report showing almost $1 trillion in investments in future oil projects at risk. They looked at 400 of the world’s largest new oil and gas fields, excluding US shale, and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70. In the US, the shale-oil party isn’t over yet, but there are bound to be some oil projects planned for next year that have little hope of a productive future. If the unprofitable projects were scuttled, it would mean a loss of 7.5 million barrels per day of production in 2025, equivalent to 8% of current global demand.
