Market Snapshot: Stock market rebounds as energy rally helps investors shake off Italy angst

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U.S. stocks rose sharply on Wednesday, with the main indexes recovering nearly all of the losses from the previous session amid a run-up in oil prices and energy-related shares.

Investors also appeared to shrug off the risk that Italy’s latest political drama posed to global markets, a day after news of a possible election sent global markets reeling.

See: Italy’s crisis may be a buying opportunity for stock investors

What are the main benchmarks doing?

The Dow Jones Industrial Average DJIA, +1.29% rose 331 points, or 1.4%, to 24,693, following Tuesday’s 392-point drop. Shares of Exxon Mobil Corp. XOM, +4.07%  and Chevron Corp. CVX, +3.39% were among the blue-chip gauge’s best performers amid reports that the oil producers led by OPEC may not soon add ramp up output.

The S&P 500 SPX, +1.35% added 37 points, or 1.4%, to 2,727, recovering all of the losses from Tuesday’s drop. Gains were broad-based with all 11 main sectors trading higher. Energy shares led the gains, up 3.3% thanks to rising oil prices. Health-care and financials shares were up more than 1%.

The Nasdaq Composite COMP, +0.96% advanced 73 points, or 1%, to 7,469.

The Russell 2000 index of small stocks RUT, +1.67%  hit an all-time high, rising 27 points, or 1.7%, to 1,650.

A measure of volatility—Cboe Volatility Index VIX, -13.10%  fell 14% to 14.65, after spiking 29% on Tuesday.

What’s driving markets?

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.

Global equities and other assets generally perceived as risky found their footing Wednesday, as traders focus on what Italy’s politicians might deliver next. Italy’s stocks and bonds, as well as the euro, are all in recovery mode.

A coalition government led by antiestablishment parties might be in the cards again for Italy, after it was blocked earlier in the week.

Read: What’s the latest in Italy’s political drama?

What are strategists saying?

“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,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Antonelli said 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.

What are other markets doing?

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, +1.0138% rose to $1.1651 from $1.1541 late Tuesday in New York, helping to send the ICE U.S. Dollar Index DXY, -0.70% lower.

The yield on the 10-year Treasury note TMUBMUSD10Y, +2.37% was around 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, +0.21% settled higher, while U.S. oil futures CLN8, +2.35% ended with a gain of 2.2%.

Which stocks are in focus?

Shares in Salesforce.com Inc. CRM, +2.29% rose 3.4% after the maker of software for customer relationship management posted quarterly results and an annual outlook that beat forecasts.

But Michael Kors Holdings Ltd.’s stock KORS, -12.09% skidded 9.5% after the fashion house posted its results and signaled it remains open to making acquisitions.

HP Inc.’s stock HPQ, +3.90% was higher after the maker of computers and printers posted a revenue beat late Tuesday, but earnings just matched forecasts.

Dick’s Sporting Goods Inc. DKS, +25.89% stock jumped 22% after the retailer reported first-quarter earnings and revenue that beat expectations and raised its guidance.

DSW Inc. DSW, -5.72% shares dropped 10%, pulling back from the previous session’s 2-year closing high, after the discount shoe and accessories retailer reported better-than-expected fiscal first-quarter earnings and revenue, while keeping its outlook unchanged.

Which economic reports are on tap?

The U.S. added 178,000 private-sector jobs in May, payrolls processor ADP said Wednesday. April’s figure, meanwhile, was reduced by 41,000 to 163,000.

Meanwhile, the first revision of the gross domestic product showed the U.S. economy grew a touch softer in the first quarter than originally reported, mainly because of a slower buildup in inventories. GDP was trimmed to an annual 2.2% pace from 2.3%.

The trade gap in goods—services are excluded—fell 0.6% to $68.2 billion from $68.6.

Check out: MarketWatch’s Economic Calendar

The Federal Reserve said the U.S. grew “moderately” from late April to early May in its latest evaluation of the economy, indicating the central bank remains firmly on track to raise interest rates next month.

—Barbara Kollmeyer contributed to this article