In trading on Monday, the Dow rose by as much as 61 points (or 0.36%) while the S&P 500 was supported by energy stocks after a lower open.
In an email to clients, NYSE floor governor Rich Barry shared five reasons why sentiment is more bullish:
- Economic data — like Friday’s jobs report — have been better than expected and have addressed recession fears.
- It looks like the sell-off in commodities is over. Crude oil has rallied more than 40% from the February 11 low, and short positions have reduced. Investors are looking ahead to the positive effects this could have on earnings in the energy and material sectors, which have been rallying the most.
- The yield curve has steepened a bit, which has been good for financial stocks.
- The market expects the Federal Reserve to lower its expectations for the number of rate hikes this year, to as low as two from four. The Fed is meeting next week.
- More S&P 500 stocks have been hitting “higher highs” and “higher lows” over the last month. High-volume days increasingly match with rallies, not declines.
And to sum it up, it’s really all about crude oil:
“Lastly, to quote one market-watcher: ‘Traders are in awe of the relentless strength in crude and the serial short covering in energy and material stocks,'” Barry wrote.
Brent crude oil, the international benchmark, crossed $40 per barrel for the first time since December.