Before The Bell: Oil Hits Record; Automakers Feel Pain
Oil moved to within a few points below the inflation-adjusted record. Analysts are expecting the worst December auto sales in over a decade. Futures are slightly higher.
WSJ reports crude oil touched a record $100 per barrel yesterday before settling at $99.62. Oil's close on the New York Mercantile Exchange was a record high in nominal terms and just below the inflation-adjusted price of $102.81 set in April 1980. Yet sky-rocketing energy prices haven't hit the U.S. economy as severely as in the past due to increased efficiency, but analysts question how long the trend can continue. Get Professor Adam Michael's view in Trends Affecting Oil Price.
From the Bull Pen: "$100 oil could seem like a bargain if economic growth continues but supply of oil is constrained," said Professor Michael. Those who remain bullish may play the upside in the oil ETF (USO); sell-stops in the near term below $75. Transocean (RIG) is also an option, sell stops below $140.
From the Bear Cave: Bears can expect airline stocks to suffer should oil prices remain elevated. A downside opportunity may rest in Alaska Air Group (ALK); buy-stops above $24.75.
Automakers Feel Pain
Reuters reports, in the latest sign of a sluggish U.S. economy, that analysts expect U.S. auto makers to report the worst December sales figures in over a decade. New U.S vehicle sales for December are projected to be between 15.4 mln and 15.9 mln vehicles, well below last year's figure of 16.7 mln. Light vehicle sales are expected to be approximately 16.1 mln, the lowest since 1998. Just yesterday, General Motors' (GM) sales chief said GM's share of retail sales would be "really flat" in 2007 and short of its original goal of 3 mln vehicles. For more of an overview, see Professor Bennet Sedacca's 2008 Outlook: I Don't Know.
From the Bull Pen: Professor Kevin Depew mentioned yesterday on the Buzz Point and Figure Breakouts Barrick Gold (ABX) and iShares Silver Trust (SLV), both of which benefit as safe havens from broad economic weakness affecting the automakers. Sell-stops may be placed at $44 and $148 respectively.
From the Bear Cave: Bears are wary of the double bottom break in GM and may press the downside; buy-stops above recent highs ($25.60).
Click on Minyanville's Stocks To Watch for more company-specific ideas.
Quick Check Around the World
Traders fight the brutal cold on Wall Street this morning and find foreign markets trading mostly lower.
Asian trading closed with the Hang Seng -2.44%, Sensex -0.59%, Taiwan -1.67% and Shanghai +0.89%.
A quick look towards Europe finds the CAC -0.26%, DAX -0.96%, FTSE +0.15%, ATX -1.21%, Swiss Mkt. -1.94% and Stockholm -1.18%.
A Look At Commodities
Crude oil is slightly lower this morning down -0.24 to 99.38. Gold continues to move higher up +7.10 to 867.10. Silver is up +0.173 to 15.34, and copper is up +2.85 to 307.90.
The dollar index is down -0.172 to 75.802.
As of 8:45 AM ET, S&P and Nasdaq futures are up 3.60 and 2.25, respectively, to 1462.40 and 2072.25.
On the Radar
ADP Employment Change: 40 k vs. 33 k cons.
Initial Claims: 336 k vs. 345 k cons. Prior number revised to 357 k from 349 k.
10:00 Factory Orders: 1.0% cons
Click here for the full trading radar.
Good luck and have a great day!
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