US stocks rebound along with oil price

United States stock indexes bounced back on Wednesday, driven by rising crude prices and another economic stimulus bill passed by the Senate. Better than expected quarterly earnings reports also lifted investor spirits.

The Dow Jones Industrial Average closed up 456.94 points or just shy of 2 percent to 23,475.82. The S&P 500 – a gauge of the health US retirement and education savings accounts – finished the session up 2.29 percent while the tech-heavy Nasdaq Composite Index closed 2.81 percent to the plus side.

Wednesday’s move to the upside helped shake off the lingering effects of Monday, when a crude price wipeout saw West Texas Intermediate, the benchmark for US oil, crash into negative territory for the first time ever.  

But investors seemed to see a sliver of hope on Wednesday, after the US Senate on Tuesday approved a $484bn package to help keep US small businesses afloat, throw a financial lifeline to hospitals overrun by the coronavirus outbreak, as well as provide funds for a national testing impetus to help tamp down the pandemic.

The bill will be voted on in the House of Representatives on Thursday. US legislators have already passed trillions of dollars in coronavirus relief measures.

“Given that this bill provides nearly $500bn, Congress looks likely to exceed this expectation, as state fiscal aid alone could easily top another $200bn,” analysts at Goldman Sachs said in a note to clients. 

Overall expectation of another $1.5 trillion, including the legislation that the Senate passed on Tuesday, over the 2020-2022 period “still looks reasonable, we believe”, Goldman added. 

Shares of Netflix Inc lost more than 12 percent on the day. On Tuesday, the streaming giant reported that it had doubled its projections for new customers in the first quarter but forecast a weaker second half if the lockdown measures were to be lifted, 

Shares of Delta Air Lines Inc finished the session down 2.72 percent after it reported its first quarterly loss in five years. 

Crude prices moved higher, with the June contract for delivery of US benchmark West Texas Intermediate (WTI) oil gaining 22 percent to settle at $14.11 a barrel.

That helped drive energy shares higher with Exxon Mobil gaining 2.85 percent and Chevron Corp gaining 2.42 percent on the day. 

But some analysts are cautious about the outlook for the energy sector and US crude prices. 

Cushing, the major oil storing hub in Oklahoma, will rise by about 5.0 million barrels to 23.6 million barrels for the week ending April 17, pushing crude inventories to 76 percent capacity, according to Rystad Energy.

“Time to throw old perceptions of physical laws to the side and be prepared for more surprises in this broken oil market,” Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen wrote in an email. “Prices can go to unprecedented low levels even for Brent as, unless there are further cuts announced.”

Rystad predicts that US crude output will hold steady above 12.0 million barrels per day (bdp) in the following weeks. Crude imports are also forecasted to remain at around 6.0 million bpd as an armada of Saudi cargoes is fast approaching US shores.