Stocks drop as an unabated fall in oil prices continue to erode investor confidence
US stocks ended lower at Wall Street on Monday, 15 December 2014. Stocks fell as an unabated fall in oil prices continued to erode investor confidence. The initial bounce in oil ahead of the regular market open prompted a rally in European stock markets. But as crude fell to new lows, the mood turned gloomy, with major exchanges finishing lower.
The Dow Jones Industrial Average jumped more than 100 points shortly after the market open but ended 100 points, or 0.6%, lower at 17,180.84. The tech-heavy Nasdaq Composite fell sharply, led by a big slide in biotechs. The S&P 500's traded in a 29 point range, but ended 12.60 points, or 0.6% lower at 1,989.63.
Utilities and financials were the biggest decliners, while all 10 sectors finished with losses. The energy sector began the day sharply higher, but ended 0.8% lower.
The tech-heavy index was prevented from sliding deeper into the red by relative strength among some influential components like Accenture, Oracle, and Qualcomm. Of the three, Oracle rallied 2.9% after Morgan Stanley upgraded the stock to 'Overweight.'
Traders attributed wild swings in the indexes to a combination of factors, including 'quadruple witching' event the week during which various index futures and options expire, unwinding of large positions by funds and uncertainty surrounding crude oil prices which resumed their slide after a brief rebound.
Oil succumbed to increasing selling pressure as an official from the Organization of the Petroleum Exporting Countries indicated that the cartel had no intention of cutting oil production in order to lift sagging crude oil prices. Gold and oil prices have been moving in tandem recently with gold taking its cue from the oil market more frequently.
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On the economic front, the Empire State index showed the first negative reading since January 2013, while industrial production rose 1.3% in November, the biggest increase since May 2010. NAHB builder sentiment is also expected and housing starts are due out on Tuesday.
The U.S. dollar index was firmer on Monday and hovering not far below its recent four-year high. The stronger greenback the past few months has been a bearish underlying factor for the raw commodity sector. Most raw commodities, including precious metals, are priced in U.S. dollars on the world markets. When the greenback appreciates in value against the other currencies, it makes those commodities more expensive to purchase. Read that less demand.
In overnight news, Japanese Prime Minister Shinzo Abe saw an election victory on Sunday, which was not unexpected. After his victory, Abe said he would continue on his path to boost the presently moribund Japanese economy.
Traders and investors are looking ahead to this week's Federal Reserve Open Market Committee (FOMC) meeting to discuss U.S. monetary policy. Many believe the Fed meeting will slightly change statement wording to favor the monetary policy hawks. The FOMC could also further elaborate on a timeline for raising interest rates. The Fed has not raised interest rates in six years.
Bullion prices ended lower at Comex on Monday, 15 December 2014. Gold extended its losing streak to a fourth session on Monday pressured by lower crude oil prices and a higher U.S. dollar index on this day. Gold for February delivery dropped 14.80 points, or 1.2%, to settle at $1,207.70 an ounce, while March silver sank 49 cents, or 2.9%, to $16.56 an ounce.
Crude oil prices ended lower at Nymex on Monday, 15 December 2014. A modest rebound by oil futures gave way to fresh selling on Monday, clearing the way for a new round of lows after the Organization of the Petroleum Exporting Countries offered no indication it's ready to blink and cut production. A combination of heavy supply and worries over global demand continued to weigh on oil. As oil collapsed, U.S. stocks gave up early gains, falling into negative territory.
U.S. light, sweet crude futures for delivery in January pushed modestly higher in early action, buoyed in part by port disruptions in Libya before sinking again. West Texas Intermediate crude oil, as the U.S. benchmark is known, fell $1.90, or 3.3%, to close at $55.91, the lowest finish since May 2009.
Treasuries ended the day modestly lower with the 10-yr yield higher by two basis points at 2.12%. On a related note, the Dollar Index registered a slim gain of 0.1%, but the greenback retreated more than 100 pips against the yen to 117.70.
Participation was ahead of average with more than 940 million shares changing hands at the NYSE floor.
Tomorrow, November Housing Starts (consensus 1.035 mln) and Building Permits (consensus 1.06 mln) will be reported at 8:30 ET.
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