Another Oil Price Collapse Drives Wild Action
Today's financial recap and tomorrow's financial outlook.
The International Energy Agency cuts its 2015 oil demand forecast for the fourth time in five months due to falling consumption. The IEA also said it expects the market to remain oversupplied.
Predictably, energy stocks were among the market's worst performers, with the Energy Select Sector SPDR ETF (XLE) dropping 1.9% to $74.02, a new closing low for the year.
And once again, the oil weakness flowed through to the high-yield bond market, which is suffering from fears of defaults by energy companies.
That drove money into US Treasuries as the 10-year yield dropped to 2.103%, a level not seen since the October lows. The iShares Barclays 20+ Year Treasury Bond ETF (TLT) rose 1.4% to $126.30, putting it up 23.7% for the year.
The Dow Jones Industrial Average (DJI) was the worst performer among the major indices because of its exposure to oil giants ExxonMobil (XOM) and Chevron (CVX). IBM (IBM) was also a major drag on the Dow, which fell 1.8% for the day vs. a 1.6% loss for the S&P 500 (SPX).
The action was especially ugly into the close, sending the VIX up sharply.
Overseas, European markets were weak across the board, with Germany, France, Spain, and Italy all down by more than 2.5%.
On the positive side, troubled social media name Twitter (TWTR) posted a 1.1% gain, while software giant Adobe (ADBE) rose 9.1% after reporting better-than-expected fourth-quarter earnings.
In economic news, the preliminary December University of Michigan Consumer Confidence reading was 93.8, handily beating the 89.5 consensus and last month's 88.8.
Tomorrow's Financial Outlook
There are no major earnings reports on the calendar, but we have some important economic data on top.
At 8:30 a.m. ET, the December Empire Manufacturing report will be released, followed by November Industrial Production and Capacity Utilization at 9:15 a.m. and the December NAHB Housing Market Index at 10:00 a.m.
These numbers can move the market, which combined with the erratic behavior in crude oil and high-yield, could make for an explosive day on Monday.
However, there have been signs of fear entering the market, including the aforementioned spike in US Treasuries and the VIX' 83% rise this week. Plus, the ISE Sentiment Index indicates that options market sentiment is as negative as during the October bottom.
So there is potential for a hard upward reversal if oil stabilizes or rises.
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