Stocks shrug off oil plunge, retest of low still plausible

Stocks rose on Monday.

The S&P 500 rose 1.5 percent, the STOXX Europe 600 rose 1.8 percent and the Nikkei 225 surged 2.7 percent.

However, oil prices plunged. West Texas Intermediate crude fell 24.6 percent and Brent fell 6.8 percent.

Stock markets were able to shrug off the oil price declines as investors focused on plans to reopen economies.

“Country reopenings could anchor short-term sentiment provided the COVID-19 curve remains on a flattening tangent,” said Stephen Innes Chief Global Markets Strategist at AxiCorp.

However, some analysts think the markets may be getting ahead of themselves.

“We've got this epic battle between monetary and fiscal policy on one side, and weak economic earnings, earnings data on the other,” Tony Dwyer, managing director and chief market strategist at Canaccord Genuity.

“Having a very, very flat yield curve is telling you that the economy is going to be very slow coming out of the recession and that you want to maybe just kind of wait for some of the overbought condition that was created on this relief rally to work itself out,” he said

Indeed, Jeffrey Gundlach, CEO of DoubleLine, told CNBC on Monday that a retest of the March low is “very plausible”.

“I think we’d take out the low,” he added.