Why Shares of Seadrill Jumped 13% Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Seadrill jumped 13% today before settling around 10% -- one of the only good days in months for stockholders of this offshore driller.

SDRL Price data by YCharts

So what: The stock's driver today was a sharp rise in oil prices after the Federal Reserve said it would keep rates low for the foreseeable future. Specifically, the Fed droppeda policy-statement pledge to keep rates low for a "considerable time," replacing it with a promise to be "patient" in tightening monetary policy.

That means easy money will be available for some time to come in the U.S., which should help economic growth. The hope is that oil demand will thus rise, and that's why the commodity shot higher late in the day.

Now what: Energy stocks have been incredibly volatile lately, and traders are looking for signs that will send shares higher or lower. Today, they got what appears to be a very bullish statement from the Fed.

Long-term investors should not see today as either a buy or sell sign, but rather as noise in the market. The global oversupply of oil persists, pressuring prices, and there is concern that economic growth in Asia won't push oil demand higher. Nothing in that long-term thesis changed today. As for Seadrill, it's a high-risk bet on recovery in the oil market, but I think it's well positioned and has a better risk/reward profile than most energy stocks at this point.

The article Why Shares of Seadrill Jumped 13% Today originally appeared on Fool.com.

Travis Hoium owns shares of Seadrill. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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