Oil Collapses on Lack of Progress in Production Cuts
Today's financial recap and tomorrow's financial outlook.
The positive revision came from larger gains in nonresidential investment, inventories, and purchases of durable goods. Less exports caused a lower revision.
Separately, consumer confidence fell to 88.7 in November from 94.1 in the month prior, largely due to drops in lower income earners that may be seeing the optimism from lower gas prices wear off.
Oil fell after an announcement from Russia's state-owned oil company Rosneft's CEO and Venezuela's energy minister that a meeting between four members of OPEC before the larger summit on Thursday did not create any agreement on a production cut. However, all were concerned over the continued drop in oil prices.
Later, the Wall Street Journal reported that Saudi Arabia was preparing to press OPEC members to more strictly adhere to the current production quota of 30 million barrels per day. That would effectively cut production by about 300,000 barrels, which would not be enough to halt the decline in oil prices. Brent crude oil was up as much as 1% before the first batch of news hit, well above $80/barrel, and fell to close down almost 3% for the session.
US equities followed European markets higher in early trading. The small cap Russell 2000 (RUT) was the top performer early on, but that performance waned as oil turned for the worse. The energy sector was the worst performer in the S&P 500 (SPX), down 1.55% for the day. Apple (AAPL), a stalwart of the latest equity advance, turned lower after an intraday reversal. The SPX closed down a few points on the day in what was an otherwise lightly traded day ahead of a winter storm tomorrow in the Northeast.
Treasury yields fell as the 5-year auction saw strong demand after a similar display at yesterday's 2-year auction. Indirect bidders, mostly foreign buyers, purchased 65% of the $35 billion offering, which is the second highest on record. The 5-year yield fell by 3bps to 1.57%.
Tomorrow's Financial Outlook
The economic data calendar for tomorrow is very full due to the holiday-shortened week. We will see October durable and capital goods orders, personal spending and income, the regional Chicago manufacturing survey, and pending and new home sales data. All of this is scheduled for the morning and should provide for some fireworks. The Treasury will sell $29 billion in 7-year notes.
The only relevant piece of economic data scheduled for tomorrow elsewhere in the world is the preliminary report of third-quarter UK GDP growth. Growth is expected to rise 0.7% from the prior quarter, matching the pace of the second quarter. Because of the Bank of England's sensitivity to slow growth, any deviation from expectations could cause a reaction in global fixed income.
Deere (DE) is the only earnings report of note
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