Dow Retakes 12,000 as Japan Fears Subside

And just like that, the slide by stocks in the first half of last week is gone. As the main focus of attention by traders has moved in recent days from oil prices to the events in Japan, a stabilization in events over the weekend at the nuclear power plant in Fukushima has seemingly prompted investors to put a little more money on the table as willingness to take on risk ascends. On Monday, the Dow Jones Industrial Average closed back above 12,000 for the first time since March 11, ending up 178 points to 12,037. The Nasdaq  rose 1.8% to 2692 and the S&P 500 gained 1.5% to 1298. In fact, the equities market may have now worked its way back into the no man’s land where oil prices may begin to return as the market’s leading spark. Higher crude prices may have helped soothe fears of lower consumer demand in Japan, but another run above $105 a barrel may remind investors of the downside to Middle East turmoil that never really went away. Oil gained 1.2% to finish above $102 a barrel for the first time since March 11, as energy stocks surged across the board. In particular, smaller oil drilling and equipment stocks were again catching some speculative bids they had enjoyed before the earthquake in Japan stopped their momentum. Small-cap name Tesco (NASDAQ: TESO ), for example, gained nearly 9%, while larger rival Oceaneering International (NYSE: OII ) gained more than 6%. Speculative euphoria also was seen across the small-cap space — the Russell 2000 jumped 2.3% to close at its highest level since March 9. And therein lies the question behind the nature of the 3.3% bounceback in stocks over the past three sessions: Is the recent rally a function of risk-taking that indicates stocks have more upside, or that the outperformance of small-caps will spell an early demise? With not much expected this week in the way of corporate of economic data, the momentum in stocks is likely to continue being decided by events in Japan and the Middle East.
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