Yuan Slides Again, Oil Declines, Markets Panic - Markets This Morning

  • Stock markets started down yesterday, but reversed on optimism from home-builders.
  • The NASDAQ wound up rising by nearly 1%, with tech, media and biotech leading the way.
  • It was another bad day in the oil-patch.

Yuan Slides Further, Oil Declines - Markets Panic Yet Again

Yuan Slides Again, Oil Declines, Markets Panic - Markets This Morning

This is the standard narrative now isn't it? No, this isn't a headline from last week. In spite of a firmer mid-point set by the Chinese central bank for the Yuan, the currency slipped further, pushing markets into panic mode. The Shanghai Composite closed down 6.1%, setting the tone for what could be yet another day spent in the grip of the bears, for U.S. markets.

Subsequently, oil prices continued to slide, with the U.S. benchmark West Texas Intermediate or WTI falling to USD 41.80, its lowest level since March 2009. Oil's slide has been a growing concern, and with all that's happening with the top 2 economies in Asia (China and Japan), and the return of Iranian oil to the market, things only look worse.

Expect a rather negative day today for stock markets; but then, that's what we thought yesterday, and here's how that panned out.

Defying Expectations - Stock Markets Rebound Strongly

Many analysts expected Monday to be a down day on Wall Street, and it started that way, with the Dow falling by 100 points within minutes. Then at 10:30 AM home-builders reported they were optimistic  and stocks reversed course.

Earlier traders faced a mixed verdict from Asia, with Japan’s Nikkei up 0.5%, the Shanghai composite up 0.73%, but the Hong Kong Index down 0.74% and Bombay’s Sensex, down 0.67%, and in Europe, with the German DAX down 0.51%, England’s FTSE nearly unchanged and the French CAC index up 0.57%.

Once the U.S. averages started to surge, however, they really surged, with the NASDAQ finishing up 0.86% to 5,092 as trading ended. The Dow finished up 0.39% at 17,545 and the S&P 500 average was up 0.52% to 2,102.

Tech Stocks Continue To Gain - Tesla Leads The Way

Tech, media and biotech led the way. Starting with tech stocks, Amazon (NASDAQ:AMZN) was up $3.35 to almost $535 despite being called a horrible place to work by The New York Times. Apple (NASDAQ:AAPL) was up $1.11 to $117, and Google (NASDAQ:GOOG) rose another $3.75 to finish near $693.

The biggest gainer of course, was Tesla (NASDAQ:TSLA), which soared nearly 5% nigher on a price target upgrade by a Morgan Stanley analyst, on expectations that the company could lead the autonomous vehicles market, combining its electric vehicles with an app-based, on-demand mobility service, which could take on Uber.

Biotech Stocks March On

Among the hot biotech names were Incyte (NASDAQ:INCY), up 8.38% to $114.67, Allergan (NYSE:AGN), up another 2.15% to $321.25 (it was $218 a year ago), and Amgen (NASDAQ:AMGN), up another 1.21% to $169.75. Biotech stocks have had a good run this year, and it's not surprising that this set of stocks joined the party, with markets in a good mood.

Another Bad Day For Oil Companies

Oil continued to be a big story, a bad one if you’re holding it but a great one if you’re using it. West Texas Intermediate, the main U.S. grade, fell below $42/barrel and finished at $41.91, natural gas was down over 2% to less than $2.75/mcf, and while rig counts read like the worst is over, those who cover traders, like Tom Engelhardt, say low prices are “the new normal,” and the glut will just get worse.

Where once prices spiked on rumors of war, now they fall based on rumors of peace, with Iran expected to follow Iraq into increasing supply. Chinese demand is not rising, and many countries have pledged to cut carbon emissions, putting a lid on their demand.

The question now is who will follow a unit of KKR (NYSE:KKR), Samson Energy into bankruptcy. It’s the second big bankruptcy suffered by the publicly-traded equity firm – the former TXU Corp. renamed Energy Future Holdings, went bankrupt last year. This will offset an expected gain to be earned when First Data Corp., a transaction processor it bought in 2007, goes public in the next few months.

Some speculators believe candidates may include Legacy Reserves (NASDAQ:LGCY), down 7.25% to under $6.65, Linn Energy (NASDAQ:LINE), down another 4.23% to $3 (this was a $30 stock a year ago), and Breitburn Energy (NASDAQ:BBEP), down another 6.16% to $2.59 (this was a $23 stock less than a year ago). North Dakota, where the Bakken oil play is located, no longer sports the country’s lowest unemployment rate. It’s still at a relatively-low 3.1%, but Nebraska is at 2.5%.

So What Happens In The Markets Today?

Some oil related stocks remain in a state of denial on pricing. Kinder Morgan (NYSE:KMI), the pipeline company, was up 1.21% yesterday, finishing at $34.37. Exxon Mobil (NYSE:XOM) was up .5% to $78.77. There is a belief that companies offering storage like KMI can name their price and majors like Exxon Mobil can now pick up bargains. If that attitude cracks, it could take the whole market down with it today.

Markets tend to climb a wall of worry. Fears about China, about the Fed raising rates, and about an oil crash keep many analysts bearish, they keep short sellers busy and they keep money on the sidelines. All that is good for stocks, because if everyone is in there’s no one left to buy.

There is still enough worry out there, in short, to push this market higher eventually.

For your daily dose of key news and events, you can check out our stock market news daily, Markets This Morning.

Edited and updated with late night and early morning news by in-house editors.

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