The crude oil prices experienced a significant decline while investors closely monitored attempts to broker a ceasefire between Israel and Hamas.
At the close, the Dow Jones Industrial Average saw a gain of 369.54 points, equivalent to a 0.97% increase, reaching a new record closing high of 38,519.84 points. This achievement occurred just one day after the index suffered a loss of over 300 points.
The S&P 500 index rose by 1.25%, concluding at 4,906.19 points, while the Nasdaq index increased by 1.3%, reaching 15,361.64 points.
One day after the Federal Reserve’s monetary policy meeting, where the decision was made to keep interest rates unchanged and policymakers aimed to temper market expectations regarding potential rate cuts, investor attention shifted back to the financial reports of publicly listed companies. Among the Magnificent 7, a group of large-cap technology companies, four released their Q4/2023 financial results after the market closed.
Apple, the manufacturer of iPhones, concluded the session with a gain of over 1%, significantly contributing to the S&P 500’s upward movement. The e-commerce giant Amazon saw its stocks rise by 2.6%, while Meta, the parent company of the social network Facebook, experienced a 1.2% increase.
Before the market opened, pharmaceutical company Merck reported financial results that exceeded expectations, providing strong momentum for the Dow Jones, with Merck’s stocks closing with a gain of over 4%.
On the previous Wednesday, the Dow Jones witnessed a decline of 317 points, equivalent to a 0.8% decrease, marking the worst trading session since December. The S&P 500 fell by 1.6%, the most significant decline since September, and the Nasdaq had its most challenging session since October, experiencing a 2.2% decrease.
The primary reason for the stock market’s Wednesday decline was signals from the Fed regarding interest rates. In the press conference following the first monetary policy meeting of 2023, Fed Chair Jerome Powell dismissed the possibility of interest rate cuts in March, greatly disappointing investors who had anticipated such a move.
Post this Fed meeting, the market is now leaning towards the likelihood of the Fed commencing interest rate cuts in May.
“I believe the market has run ahead of itself, betting that the Fed will cut rates early and aggressively. However, for the Fed to act as the market expects, the economy would have to be much weaker than it currently appears”, commented Torsten Slok, Chief Economist at Apollo Global Management, to CNBC.
Nevertheless, with the Fed expected to reduce interest rates in 2024, yields on U.S. government bonds continue to decline. At one point, the yield on the 1-year term dropped to its lowest in a month, closing with fluctuations below the 3.9% mark.
Investor focus during Friday’s trading session will be on the comprehensive January employment report from the U.S. Department of Labor, a crucial data point reflecting the state of the U.S. economy, influencing interest rate expectations, and the Fed’s interest rate trajectory.
WTI crude oil futures traded in New York decreased by $2.03 per barrel, equivalent to a 2.68% decrease, closing at $73.82 per barrel. Brent crude oil futures for April dropped by $1.85 per barrel, a 2.3% decrease, closing at $78.7 per barrel.
Throughout the session, there were instances of oil prices increasing by more than 1% as investors contemplated the output meeting results of an OPEC committee. The committee stated that a review of production data from November to December 2023 indicated full compliance with production cuts by OPEC member countries. In this meeting, the committee also proposed maintaining the plan to cut production by 2.2 million barrels per day until the end of the first quarter of this year.
Since the beginning of the year, oil prices have faced downward pressure from the bleak outlook for the Chinese economy. However, conversely, “black gold” prices have also been supported by the prospect of a widening armed conflict in the Middle East, especially in recent days after an attack causing casualties to U.S. soldiers in Jordan.
Nevertheless, parties involved are making efforts to negotiate a ceasefire agreement in the Gaza Strip between Israel and the Hamas rebels.
In contrast, some experts believe that the consumption demand for oil in China, in particular, and the world in general, this year will not be too bad. U.S. bank JPMorgan Chase forecasts that the Chinese economy will still achieve relatively good growth of 4.9% this year due to strong stimulus measures. A report from JPMorgan notes that there are virtually no signs indicating a slowdown in China’s oil demand.
“Beyond political issues, our view is that 2024 will fundamentally be a robust year for the oil market… The market has passed its bottom, and Brent oil prices from now until May will continue to hover near the upper range of $80-90 per barrel”, the report concludes.
By. Pham Thanh Bien
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