The S&P 500 rose slightly Tuesday as the market remained resilient even after a spike in oil prices.
The Dow and S&P 500 are coming off their fourth straight day of gains, rising nearly 1% and 0.4% on Monday. The Nasdaq, meanwhile, slipped 0.3%.
Markets have been quick to recover of late, with the major averages rising even when faced by persistent inflation, a banking crisis and higher rates.
“Resilient is a good word,” said Julian Emanuel, senior managing director at Evercore ISI. ” [The] bottom line is that the economic forward looking backdrop continues to soften even as present conditions (2-3% GDP in 1Q) remain strong, set against already defensive positioning, stocks remain deadlocked in the 3800 -4200 range.”
This week, the energy market became another potential source of uncertainty, after OPEC+ announced it was slashing output by 1.16 million barrels of oil per day. West Texas Intermediate futures had their biggest daily gain in nearly a year on the news. On Tuesday, crude rose another 1%.
“Given the transition the world is undergoing as it embraces ‘clean and green energy,’ OPEC+ understands all too well that its still highly valued ‘liquid gold’ will at some point begin to lose its shine,” said Quincy Krosby, chief global strategist for LPL Financial.
“Until then, as the countries dominating OPEC+ prepare for the future by spending trillions of dollars rebuilding infrastructure and refocusing away from crude oil as their primary source of income, managing the price of crude will be used more directly and aggressively than was anticipated,” she added.
Analysts say the prospect of higher oil prices could stoke inflation and recession fears, but Mona Mahajan, senior investment strategist at Edward Jones, said she doesn’t expect markets to price in a recession a second time after the “pretty severe” bear market in 2022. If there is some volatility, it’s more likely to be a “normal” correction of between 5% and 15% that sets the market up for a better second half, she said.
“We do think we’re headed toward a period of consolidation, maybe some volatility,” she said, highlighting earnings, market expectations of Fed policy and a slowdown in lending amid the banking crises as three incremental headwinds.
On Tuesday investors will get the latest number from the monthly Job Openings and Labor Turnover Survey, or JOLTS, at 10 a.m. ET.