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Another Oil Price Collapse Drives Wild Action

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Today's financial recap and tomorrow's financial outlook.

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Markets went on a wild ride today as crude oil melted below $58.

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.

Twitter: @Minyanville

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No positions in stocks mentioned.

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.

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