Dow Adds 1,000 Points in Relief Rally; Oil Levitates Following Extreme Selloff

U.S. stocks rebounded sharply on Wednesday, as traders bought one of the biggest dip on Wall Street since the financial crisis. Oil’s rapid relief rally helped energy shares lock in huge gains following a week of relentless declines.

Relief Rally

Stock markets staged a massive relief rally on Wednesday, with the major indexes bouncing back from one of their worst stretches of a decade. The Dow Jones Industrial Average surged 1,086.25 points, or 5%, to close at 22,878.45. That’s one of the biggest rallies during the nearly ten-year bull market.

The broad S&P 500 Index climbed 5% to settle at 2,467.70. All 11 primary sectors reported gains, with consumer discretionary, energy and information technology surging by an average of 6% or more.

Meanwhile, the technology-focused Nasdaq Composite Index surged 5.8% to finish at 6,554.36.

The CBOE Volatility Index, commonly known as the VIX, fell 15.7% to close at 30.41. The fear index trades on a scale of 1-100 where 20 represents the historic average. Volatility has been well above average for the better part of Q4.

Read about Wall Street’s pre-holiday rout: Stock Selloff Deepens in Holiday-Shortened Trade; Dow Plunges 653 Points.

Oil Bounces Back

Rebounding share prices rubbed off on commodities Wednesday, as crude oil bounced back from 17-month lows. Futures prices gained roughly 8% on the day after falling more than 6% on Christmas Eve. Brent, the international futures benchmark, settled at $54.47 a barrel on London’s ICE futures exchange, having gained $4.00, or 7.9%.

West Texas Intermediate (WTI) posted similar gains and extended its relief rally into the evening session, where it was up 33 cents, or 0.7%, at $46.55 a barrel.

Russian Energy Minister Alexander Novak talked up oil prices earlier in the week by forecasting a return to stability in the first half of 2019.

“I think that during the first half, due to joint efforts, which were confirmed by the OPEC and non-OPEC countries this December, the situation will be more stable, more balanced,” Novak said Tuesday, according to Reuters.

Crypto Markets Stabilize

Digital currency prices stabilized on Wednesday following a series of volatile moves, as bitcoin found support above $3,800. The leading digital currency touched highs of around $4,300 at the beginning of the week. At the time of writing, bitcoin was valued at $3,864.25, where it had gained 1% on the day.

Elsewhere in the market, Ethereum climbed 1.7% to $132.63. XRP was down slightly at $0.3806. Bitcoin cash and EOS each rose more than 3%. Stellar and Litecoin were each down less than 1%.

The cryptocurrency market capitalization reached a value of $130.5 billion on Wednesday,  recovering from the Christmas low of $126.8 billion. Trading volumes have declined substantially to around $17.4 billion from previous highs north of $20 billion.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi