An OPEC oil Production Deal Changes Things for Stocks. $SPX $CL_f $TF_f

Today’s news of major support for an OPEC deal changes the view of stocks.

The energy sector is the biggest drag on earnings by far, so any support for the price of oil is a big deal. Until now oil prices had no bottom. It doesn’t mean prices will fly us off to the moon; it only means it probably won’t fall into a bottomless pit.

But that’s a big deal in a world where oil price direction and tone are ANYone's guess. It’s a flicker of order in the midst of oil market chaos. $CL_f moved up accordingly, and the Russel 2000 (the smallest riskiest stocks that signal “risk on” or “risk off”) futures followed oil up 1.49% itself on the day. In contrast the S&P 500, Nasdaq, and Dow were all up about half a percent. This isn’t to say the next for stocks is Mars, but it to say a weight has been lifted off stocks’ shoulders; relieving a major drag on earnings.

This makes me think a test of recent highs is probable in the near term. To be sure, there are other major hurdles markets need to get over like the U.S. election, secular stagnation, and Fed policy. But stocks can still technically go higher in the face of these things. With a huge drag on earnings, not so much.