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T3's Take 3: The Oil Slick Becomes Oil Sick


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

Market Roundup

US markets kicked off the week by giving back Friday's heavy gains as a crude oil price collapse weighed on sentiment and whacked energy stocks.

Crude oil hit a new 6-year low at $37.50 intraday, falling nearly 6% by the close.

Traders remain concerned about oversupply conditions after OPEC decided against cutting output on Friday. Additionally, the US dollar resumed its upward trend, hurting oil and other commodities like gold and silver.

As a result, the S&P Energy Sector ETF (XLE) fell 3.8% to $62.24, a new two month low.. 

The S&P 500 fell 0.7% to 2077.07, while the NASDAQ fell 0.8%. The NASDAQ was dragged down by the biotechnology sector, which incidentally led the way up on Friday.

The NASDAQ Biotechnology Index ETF (IBB) fell 2.2%.

The Russell 2000 was by far the weakest of the major indices with a 1.6% drop.

The M&A Train Continues

This morning, Keurig Green Mountain Coffee (GMCR) announced it was being bought out by an investor group led by JAB Holding for $13.9 billion, or $92/share. That is an 80% premium to Friday's close of $51.70.

In addition, BBCN Bankcorp (BBCN) is buying Wilshire Bancorp (WIBC) for $1 billion. WIBC shareholders will get 0.7034 BBCN shares for each WIBC share they own.

2015 will go down as a record year for mergers and acquisitions. The recently announced Pfizer (PFE)-Allergan (AGN) deal took M&A past the 2007 record of $4.87 trillion.

According to Bloomberg data, 2015 M&A volume has hit $5.25 trillion, and there are still three weeks to go in the year.

Fed Chatter

This afternoon, St. Louis Fed President James Bullard appeared at an economic policy lunch at Ball State University.

Bullard said that the Fed's inability to accurately forecast growth, employment, and inflation have driven conflict at the bank in terms of setting policy.

Therefore, following the expected rate hike this December, the Fed's rate decisions will be made extremely difficult in light of recent failings to make proper forecasts.

In particular, Bullard is concerned about inflation. If prices don't show some upward movement, the Fed will have difficulty instituting future hikes.

This may explain why financial stocks have been sluggish as of late even though banks benefit from higher interest rates through improved net interest margins.

Tuesday's Financial Outlook

The US economic calendar will be slow again tomorrow, with just Housing Starts and Building Permits MoM Due for releease.

Overseas, British Manufacturing Production and Chinese CPI will be released.

In earnings news, AutoZone (AZO) and Toll Brothers (TOL) will release their numbers before the open. 

Costco (COST), Qihoo 360 Tech. (QIHU), and Sigma Designs (SIGM) report after the close.
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