Explained — Wall Street's best day in a year and what experts make of it

Benchmark indices on Wall Street surged on Wednesday, April 8, in response to US President Donald Trump's ceasefire announcement on the war with Iran for a two-week period, leading to a plunge in oil prices, thereby boosting risk assets.

Despite multiple reports of ceasefire violations through the day, markets held on to gains, while crude oil prices held on to most of their losses.

The Dow Jones surged as much as 1,300 points to register its best day since April of last year, while the S&P 500 and Nasdaq gained 2.5% and 2.8% respectively. The Dow Jones Transportation Index closed at record highs with gains of over 3%.

More than 400 stocks on the S&P 500 ended the session with gains, on a day that saw the index close above both its 50 and 200-Day Moving Average (DMA).

According to data, hedge funds covered their short positions on index and ETFs at the fastest pace since 2020, thereby triggering the sharp upmove on Wall Street.

What Do Experts Make Of The Move?

"The ceasefire is a clear positive, but it’s not a resolution," said Mark Hackett at Nationwide. "What stands out is how quickly the market flipped once the pressure eased. When positioning gets this crowded, it doesn’t take much to spark a reversal."

Sam Stovall at CFRA Research said that this temporary truce allowed global investors to begin contemplating the restructuring of their portfolios and a re-rotation of sector leadership in anticipation of a more long-lasting cessation of hostilities.

Stovall alluded to the recession and bear market that coincided with Iraq's invasion of Kuwait in 1990 where oil prices peaked and then tumbled. The three months after that saw the S&P 500 surge 12.4%.

"I do think, from a short-term perspective, that there are still risks that are still there," according to Eric Johnston of Cantor Fitzgerald, who said this in an interview to CNBC.

"You have a lot of players involved and, so far, Hormuz is not open. So there are still risks and so I think for the coming couple weeks, we’ll see how this plays out. But yes, broadly we think this is a buying opportunity," he added.

(With Inputs From Agencies)