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Investing.com – The Dow extended its gains on Thursday, shrugging off what Wall Street deemed a “devasting” jobless claims report thanks to surging energy stocks. Oil prices rallied on hopes of a Saudi Arabia and Russia may agree to cut production and end their bruising price war.
The Dow rose 1.50%, or 313 points. The S&P 500 added 1.99% and the Nasdaq Composite gained 1.45%.
Energy, which had been among the hardest hit sectors from the Covid-19 pandemic, turned from market foe to friend as President Donald Trump sparked hopes of an end to the Saudi-Russia price war and said he expected both nations would be cut output by up to 15 million barrels per day, sending oil prices up 24%.
Apache (NYSE:APA) up 26%, Occidental Petroleum (NYSE:OXY) up 23% and Diamondback Energy (NASDAQ:FANG), up 19%, were among the biggest gainers.
“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” Trump tweeted.
The potential for a 15 million bpd cut, however, is unlikely to prevent glut in supply, with Stacey Morris at Alerian reportedly estimating the coronavirus impact had slashed demand by about 20 million bpd, The Wall Street Journal reported.
“Clearly, it’s (the potential cut) better than the alternative of doing nothing and waiting for physical storage constraints to limit production,” Morris said. “However, even if cuts total 15 million bpd, the global oil market could still be in an oversupply situation.”
The rally on Wall Street comes even as jobless claims were higher than expected with another 6.65 million Americans filing for first-time unemployment insurance last week.
The bearish labor market report arrived ahead of the nonfarm payrolls due tomorrow, but it is unlikely to “reflect the true extent of job losses as the survey period covered the second week of March, before social distancing and business closures put millions out of work,” RBC said.
Utilities and materials and also contributed to broad-based rally, with the rising Covid-19 infections seemingly taking a backseat.
Coronavirus infections are nearing 1 million worldwide, with more than 50,000 dead so far.