American stocks rallied on Wednesday, having taken a big hit earlier in the week as news of Italy’s growing political crisis spread.
The rebound is attributed to increased demand for energy shares amid a rally for oil prices and fading worries over Italy’s political crisis.
The Dow Jones Industrial Average DJIA, +1.26% rose 306.33 points, or 1.3%, to close at 24,667.78, taking back most of Tuesday’s 392-point drop.
Shares of Exxon Mobil Corp. XOM, +3.93% and Chevron Corp. CVX, +3.11% were the blue-chip gauge’s best performers amid reports that OPEC will keep crude production curbs in place until at least the end of the year.
The S&P 500 SPX, +1.27% added 34.15 points, or 1.3%, to 2,724.01 recovering all of the losses from Tuesday’s drop.
Gains were broad-based with all 11 main sectors finishing higher. Energy shares led the gains, up 3.1% thanks to rising oil prices. The financial sector rebounded 1.9%, while health-care shares rose 1.4%.
The Nasdaq Composite COMP, +0.89% advanced 65.86 points, or 0.9%, to 7,462.45.
The Russell 2000 index of small stocks RUT, +1.50% closed at an all-time high, rising 22.70 points, or 1.4%, to 1,646.36.
Measuring volatility was the Cboe Volatility Index VIX, -12.22% or VIX, which fell 13% to 14.88, after spiking 29% on Tuesday.
In a bid to ascertain what is driving the market, a reuters report indicated that output cuts implemented by members of the Organization of the Petroleum Exporting Countries and nonmembers led by Russia will remain in place, sending oil prices sharply higher. Prices had been pressured in recent sessions amid expectations that OPEC would decide to lift production to help offset output losses from Iran and Venezuela.
Meanwhile global equities and other assets generally perceived as risky found their footing Wednesday, as traders focus on what Italy’s politicians might deliver next, however Italy’s stocks and bonds, as well as the euro rose.
According to market watch, Michael Antonelli, equity sales trader at Robert W. Baird & Co., Thinks that “The fact that the market is shrugging off Italy’s political drama suggests that maybe it was a crowded trade that was being unwound and not something more serious.”
Antonelli too market watch that recent spikes in volatility should remind market participants that capital markets are very fragile.
“Anything coming from the left field can shatter markets nowadays, so we have to brace for a long summer grind,” Antonelli said.
Taking a view on the performance of other markets showed Italy’s FTSE MIB stock benchmark I945, +2.09% was recently up about 2%, while the pan-European Stoxx Europe 600 Index SXXP, +0.27% edged up.
The euro EURUSD, +0.0171% rose to $1.1663 from $1.1541 late Tuesday in New York, helping to send the ICE U.S. Dollar Index DXY, -0.80% 0.8% lower to 94.102.
The yield on the 10-year Treasury note TMUBMUSD10Y, -0.13% rose 7 basis points to 2.84%. On Tuesday, the U.S. benchmark rate tumbled 16 basis points to 2.77%, in its largest one-day drop since the U.K.’s Brexit vote in June 2016.
Gold futures GCM8, +0.13% settled higher, while U.S. oil futures CLN8, -0.16% ended with a gain of 2.2%.