European markets were up across the board for the second day in a row. The German DAX and British FTSE closed with 1 percent advances. Japan’s Nikkei climbed 1.5 percent as oil shares found some footing, and Hong Kong’s Hang Seng rose 0.4 percent. Mumbai’s BSE Sensex continued its hot streak with a 1.5 percent rally.
Roughly half of the 30 Dow blue chips were in the positive column, led by UnitedHealth and oil supermajors Chevron and ExxonMobil. Their share prices were up around 3 percent. Oil prices were on a tear after a wild two-day slide early in the week sent the price for U.S. crude below zero — meaning sellers paid people to take the oil.
By Thursday, however, prices had rebounded 40 percent. West Texas intermediate, the U.S. benchmark, was selling for around $17 a barrel, a gain of more than 20 percent over Wednesday. Brent crude, the global benchmark, was trading at $21.54 a barrel, about a 6 percent jump.
Oil prices remain woefully depressed and far below the $50 range that most oil producers need to made a decent profit without consumers feeling gouged. Crude prices have dropped more than 50 percent since January because of an oversupply brought on by a drop in demand from the coronavirus global lockdown.
A price war between Saudi Arabia and Russia, two of the world’s largest producers, also flooded the oil market, driving prices down further. So much oil is sloshing around the globe that supertankers are doubling as oil storage tanks, floating offshore waiting to disgorge their product.
Stocks were positive most of Thursday but took a hit on reports that a coronavirus treatment by drugmaker Gilead had disappointing results from a clinical trial. The Dow plunged 300 points in minutes following the early afternoon report and remained volatile the rest of the session.
Gilead said in a statement Thursday that the document upon which the news report was based contained “inappropriate characterizations” and that the study’s findings were “inconclusive.” Gilead shares dropped 4 percent.
“Oil prices were up on optimism that U.S. demand destruction had bottomed out, that production would fall and on an expectation that oil can be stored in the U.S. Petroleum Reserve until the oversupply is erased,” said Phil Flynn, senior market analyst at Price Futures. “The expectation that the economy will begin reopening and demand will start coming back is pushing up share prices in ExxonMobil and Chevron.”
Wall Street showed little reaction Thursday after the U.S. Labor Department reported that 4.4 million Americans applied for unemployment benefits last week, bringing to 26.5 million the number of jobs lost since the pandemic took hold in the United States.
Widespread lockdowns — a defining countermeasure in the battle against a virus that has killed more than 47,000 Americans — have sent business and social activity into hibernation and temporarily wiped out most of the nation’s economy. Economists estimate the national unemployment rate is now north of 15 percent.
The federal government has unleashed trillions of dollars in stimulus spending trying to get the country back on track. But consumer spending — the main driver of the economy — remains in deep decline.
“Policy support for businesses and households through the crisis has been sizable and swift, but we see strong indication that demand destruction is larger,” said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments. “The backlog of [Paycheck Protection Program] loan applications shows that the program could run out of money again in a matter of days. Policymakers are on a race against time. The longer that the crisis drags on, the more likely a further economic and credit dislocation becomes.”
The historic dive in oil prices on Monday and Tuesday had erased nearly 1,000 points from the Dow, sending investors into another headline-inducing funk as they search for a scintilla of good news on the coronavirus front. The good news arrived on Wednesday in a U.S. Department of Energy report that showed domestic oil production dropping by 900,000 barrels per day, an ironic reaction given that the U.S. is on the verge of energy independence and is also the largest oil producer in the world at more than 13 million barrels per day.
“We’ve been talking about energy independence since Richard Nixon was president,” said Frank Verrastro of the Center for Strategic and International Studies. “The irony is that we find ourselves in an oversupplied market, where the thought of U.S. production going down is good news.”