U.S. Stocks Retreat as Oil Prices Slump
09 November 2018 - 9:39AM
Dow Jones News
By Jessica Menton and Christopher Whittall
The S&P 500 fell Thursday, dragged down by shares of energy
companies as U.S. crude oil entered a bear market.
Energy stocks in the index tumbled 2.2% as oil dropped 1.6% to
$60.67 a barrel. That marks a decline of more than 20% from Oct.
3's high of $76.41 a barrel and ends oil's longest bull market
since 2008. The slump has been fueled, in part, by the U.S.
government's decision to soften oil sanctions on Iran.
"If oil breaks below $60 a barrel, that would be psychologically
significant for the market where investors may lose confidence in
crude prices," said Stacey Morris, director of research at
Alerian.
The S&P 500 declined 7.06 points, or 0.3%, to 2806.83, while
the Dow Jones Industrial Average rose 10.92 points, or less than
0.1%, to 26191.22. The technology-heavy Nasdaq Composite shed 39.87
points, 0.5%, to 7530.88.
After a turbulent period for stocks, the S&P 500 had climbed
in six of the previous seven sessions entering Thursday and notched
a 2.1% gain on Wednesday -- its largest postelection increase since
1982.
Concerns over slumping oil prices, rising interest rates, the
longevity of the U.S. expansion and the heady valuations of large
technology companies led many investors to pull back in October.
The S&P 500 fell nearly 7% that month, its steepest decline in
more than seven years, despite most U.S. companies reporting robust
earnings growth.
Interest rates were back in focus Thursday as the Federal
Reserve held short-term rates steady. The central bank offered a
mostly upbeat assessment of the economy's performance, suggesting
another rate increase is likely at its next meeting in December.
Economists have debated whether rising inflation will force the
central bank to raise rates faster than investors are
anticipating.
"Inflation hasn't gotten too out of control, but there is a
question of whether it makes sense for the Fed to take a pause,
given the skittishness we've seen in the market in the past month,"
said Lindsey Bell, investment strategist at CFRA Research.
The yield on the 10-year Treasury note rose to 3.232% Thursday
from 3.215% Wednesday, its highest level since May 2011. Yields
rise as bond prices fall. The WSJ Dollar Index, which measures the
greenback against a basket of 16 other currencies, added 0.5%.
Getting through the midterm elections removed one element of
uncertainty hanging over the market. The result met most investors'
expectations for the Democrats to gain control of the House of
Representatives and the Republicans to retain the Senate.
Analysts say the likely gridlock in Washington will reduce
uncertainty for companies over potential changes to economic policy
and regulations. It should also decrease the likelihood of the
Trump administration passing other measures that could fuel growth
-- but inflate the budget deficit -- such as further tax cuts.
Investors are "just happy to get it behind us. Markets tend to
like it when things go as expected," said Matt Brill, a senior
portfolio manager for Invesco Fixed Income.
It also eliminates "the tail risk of greater budget deficits
going forward," he added.
Disappointing corporate news drove some of Thursday's modest
declines.
Shares in Wynn Resorts lost $14.97, or 13%, to $99.02 after the
hotel and casino operator reported profit that fell short of
analyst expectations and cast doubt on its Macau business in the
fourth quarter.
Qualcomm slumped $5.16, or 8.2%, to $58.05 after the company
posted a loss in its latest quarter. Shares of Monster Beverage
fell $1.77, or 3.2%, to $54.14 after partner Coca-Cola said it
would launch its own energy drinks.
Elsewhere, the Stoxx Europe 600 rose 0.2%. Most markets in the
Asia-Pacific region rose, catching up with the sharp jump on Wall
Street in the previous session.
In Asia, Japan's Nikkei Stock Average added 1.8% after
registering a small decline Wednesday. Hong Kong's Hang Seng Index
climbed 0.3%, while Korea's Kospi index rose 0.7%. China's Shanghai
Composite Index bucked the trend, falling 0.2%, in its fourth
consecutive session of declines.
Write to Jessica Menton at Jessica.Menton@wsj.com and
Christopher Whittall at christopher.whittall@wsj.com
(END) Dow Jones Newswires
November 08, 2018 17:24 ET (22:24 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.