- Falling oil prices more than offset indications a hike in interest rates may not come next month.
- Housing, telecommunications and fast food stocks held up.
- Bond yields fell, bargain hunters wanted.
- Oil could rise further on U.S. stock build-up and Saudi export rise.
The Oil Crash Continues
All eyes were on the minutes from the Fed's FOMC meet, but that went well, at least from the myopic perspective of the markets; but then oil took the center stage.
Remember all that talk late last year about how great the oil crash was for the U.S. economy? They lied.
Another plunge in oil prices, down 5% to $40.03 per barrel for West Texas Intermediate and below $47/barrel for Brent, with September futures even lower, offset the positive sentiment that emerged from indications the Federal Reserve may not raise interest rates in September and sent the markets plunging 1% yesterday.
Yesterday's Big Losers - Stocks That Lost Ground
With the fall of oil, and major indices, some tech stocks got hurt quite bad, like Russia's leading search engine, Yandex (NASDAQ:YNDX), which fell nearly 4.5% to $11.9 a share, GoPro (NASDAQ:GPRO) which fell 4.9% to $54.6, Plug (NASDAQ:Plug) which was down over 3% to 2.2, Micron (NASDAQ:MU), down 2.9% to $15.9 and Twitter (NASDAQ:TWTR), which fell nearly 2.5%. Then there was a hoard of names that lost between 1% and 2%, like Chinese search major Baidu (NASDAQ:BIDU), Apple (NASDAQ:AAPL) and most prominently Tesla (NASDAQ:TSLA), which finally moved with the markets, after a defiant, near 7.5% rally over two days.
When the dust settled the Dow was down .93%, or 162, to 17,348, the broadly-based S&P 500 was down .83% or 17.31 to 2,079, and the tech-heavy NASDAQ was down .80% or 40.30 to settle at 5,019.
Few companies escaped the carnage. But Google (NASADAQ:GOOG) was up $5.31, .77% to $694/share, LinkedIn (NYSE:LNKD) , up 1% to $188.9, and McDonald’s (NYSE:MCD) which was up 34 cents or 0.34% to $101.10. Worse, volume was heavy and the VIX, the volatility index, rose 10% to 15.22. It all seemed to spell deflation, slowing global growth, and big economic trouble ahead.
Stocks In The News Today
Data storage company NetApp (NASDAQ:NTAP) was up over 12% at $33.3 a share in after-hours trade, backed by strong quarterly results. PayPal (NASDAQ:PYPL) made its first acquisition as a public company, acquiring Modest, a mobile focused 'contextual commerce' company.
The good news for Apple is that there's a huge curiosity building up over the company's rumored iPhone 6S launch, ranging from the colors it'l be launched in, to the launch date, all mostly emerging from 'leaks'. More so because there is a lot of bearish sentiment building up as well, like I've talked about later.
Chinese Rise Ignored
For a change it was China that was the outlier. The Shanghai Index was up 1.24% overnight, but it had plunged in the morning and other markets seemed to follow that. Japan’s Nikkei was down 1.61%, the Hang Seng index in Hong Kong was down 1.31%, having lost about 20% from its April highs, while Bombay's Sensex index bucked the trend to rise 0.36%. Europe seemed to take its cue from Japan, with Germany’s DAX index down 2.14%, England’s FTSE down 1.88% and the French CAC down 1.88%.
Minutes from the Federal Open Market Committee meeting in late July, which came out around 2 PM, seemed to indicate a reluctance to raise rates, and created a brief rally, and the averages went briefly to unchanged. Then oil prices screamed sell, and a lot of people sold.
This time the big oil names were not immune. Exxon Mobil (NYSE:XOM) was down 2.13% to $76.24, Chevron (NASDAQ:CVX) was down 3% to $80.91, and Norway’s Statoil (NYSE:STO) was down 3.8% to $15.18. All economies tied to oil are being hit, including Canada, and most Canadians believe a recession there has begun. Speculators keep talking about where they might try a few oil stocks, but so far all who have over the last year have come back burned.
Where is the Optimism? Housing - Again
There is optimism, especially in housing. Low oil prices make suburban living more attractive, suburbs are where the cheaper land is, and homebuilders are benefiting. Housing starts are at a five-year high, rents are rising, and that’s why stocks like Home Depot (NYSE:HD), unchanged yesterday after a sharp rise the day before, and Lowes (NYSE:LOW), which rose 1.84% to 74.36 after reporting decent earnings, are among the market stand-outs.
There is also optimism in the telecommunications sector, with Comcast (NASDAQ:CMCSA) up .39% to $59.92, Time Warner Cable (NYSE:TWC) up .2% to $191.48, and Sprint (NYSE:S), the wireless phone operator controlled by Softbank of Japan, which has been buying the shares recently, rising another 1.13% to $4.91.
Those who speculate on bonds also did well yesterday. The U.S. 10-year bond is down to a yield of 2.13%, having come down from 2.5% in late June and making those investors a lot of money. The 30-year bond settled at 2.81%, making this a great time to buy long-term money.
So What Happens In The Stock Markets Today?
There is an enormous amount of short-term pessimism in the U.S. market right now, with talk of an Apple's “death cross” and predictions of a general 10% correction becoming increasingly common.
Bearish bets on the Yuan are at a five year high, and the sentiment at large is bearish all around, not just in terms of currency.
Oil could fall further, fuelled by a rising stock build up in the U.S. and a rise in exports from Saudi. Certainly falling oil is a double-edged sword, and traders felt the bad edge of that yesterday. But there’s a good side to falling oil, and maybe that will unlock some bargains today.
Get a quick look at the key events that unfolded before the bell in our daily stock market news round-up, titled Markets This Morning.
This post was edited and updated with late night and early morning news by in-house editors.