Wall Street appears to have regained its mojo, with stocks in one month going from the brink of a bear market to their highest point this year. But that’s not where the real action is. Oil, which had been the biggest black hole in terms of an asset class, has come roaring back in a big way.
Friday, the price of U.S.-produced crude rose 1.7% to $38.50 a barrel after the International Energy Agency said in a report that global oil “prices might have bottomed out.” That was welcome news to financial markets that had seen oil fall to 13-year lows in early February on worries of swelling global supplies and weak demand.
The IEA said signs of falling U.S. production and a reduced outlook at non-OPEC oil producers were encouraging even though the global glut persists. Friday’s rally extended a stunning turnaround in oil that now has lifted its price 45% from February lows. The drop in oil, combined with concerns about slowing growth in China, was one of the primary culprits pundits pointed to when explaining the unrelenting slide in stock prices early this year.
Oil’s rebound also has helped repair the damage to stocks. Friday, the Dow Jones industrials and Standard & Poor’s 500 closed at their highest point of the year, down roughly 1% from where they ended 2015. And oil? Bubbling crude is now up almost 4% for 2016.