Luck of the Irish

By Nicholas Jasinski |  Thursday, March 17 In the Green. Investors enjoyed a green Saint Patrick's Day today, with stocks stretching a sizable rally into a third day. The S&P 500 is up almost 6% since Monday's close, while the Nasdaq Composite has added more than 8%. All 11 sectors of the S&P 500 rose today, led by energy's 3.4% gain as oil prices surpassed $100 a barrel again. Utilities brought up the rear, up 0.4%. There has been no clear catalyst for the sudden optimism, other than the possibility that things had gotten overly pessimistic before. Mean reversion can be a powerful force in the short term. There's also the Wall Street adage that investors would prefer bad news to uncertainty. And while there's still plenty of unknowns about geopolitics, inflation, economic growth, corporate earnings—plenty and plenty—some things are in fact incrementally clearer now than they were at the start of the week. The Federal Reserve has embarked on its tightening cycle and hinted at future plans, commodity prices have stopped rising precipitously, and CEO and CFO speak at a couple of conferences this week has emphasized companies' ability to pass on cost increases to customers. That's not a recipe for sustainable gains, however. This week's stock-market bounce has been strong enough that it's highly likely to prompt some mean reversion again—just in the negative direction this time. "What goes up must come down," wrote Barron's Jacob Sonenshine today. "Words just as apt about stocks as they are about gravity, especially in today’s unsettled world."