Grexit and Oil-Related Weakness Drive Risk Assets Lower
Today's financial recap and tomorrow's financial outlook.
West-Texas intermediate crude oil futures dropped below $50 for the first time since March 2009 in today's session. The damage spread to the stock market as well. The exploration and production sector of the S&P 500 lost 6.3% in today's trading. There was no fundamental reason that could be attributed to the decline as there were a number of mildly negative reports early in the morning. Separately, two major investment banks released in their 2015 outlooks that they see oil prices depressed below $50 for years to come, which may have been the cause for the drop.
The SPX fell by 1.83% in today's trading. The drop was led by declines in energy, materials, and industrial stocks. Some analysts now believe that the weakness in oil would spread to other parts of the economy, specifically industrials with direct exposure to oil exploration and production, and that attributed to the decline. Treasuries rallied strongly - the 10-year yield fell by 7bps to 2.04%.
Tomorrow's Financial Outlook
Many market participants are expecting a bounce tomorrow, whether or not the SPX opens up or down. Short-term momentum indicators are now severely oversold, which would indicate a relief rally is probably in the cards. Ultimately, a trip to the 200 day moving average at 1960 appears to be in the cards at this time. Tomorrow's economic reports include the December ISM non-manufacturing index and November factory orders. The ISM index is expected to moderate to 58.0 from 59.3 in the prior month, which had been the second highest reading in the past decade.
Across the rest of the world most of the economic data scheduled to be reported is related to the services industry. Overnight, China, the eurozone, and the UK will all release their respective services PMI's for December. Additionally Australia is set to report its trade balance tonight.
Micron Tech (MU) is the only major US company scheduled to report earnings tomorrow.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter