By Anora Mahmudova and Carla Mozee, MarketWatch
WTI oil futures fall bellow $50 a barrel
NEW YORK (MarketWatch) -- U.S. stocks were clobbered Monday in
an indiscriminate sell-off triggered by a renewed plunge in crude
oil prices and surging dollar, which left the Dow and the S&P
with their worst losses since October.
The S&P 500 (SPX) closed off session lows but still suffered
its largest one-day decline in three months. The index also
suffered its longest losing streak in a 12-month period, falling
for the fourth-straight session. The benchmark index lost 37.62
points, or 1.8%, to 2,020.58.
The Dow Jones Industrial Average (DJI) also had its worst down
day since October, with 28 of its 30 components closing with
losses. The blue-chip index dropped 331.34 points, or 1.9%, to
17,501.65.
The Nasdaq Composite (RIXF) shed 74.24 points, or 1.6%, to
4,652.57, while Russell 2000 (RUT) closed down preliminary 15
points, or 1.3%, to 1,183.
(https://twitter:com/bespokeinvest/status/552125197881724928
.)
Meanwhile, the 10-year Treasurys rose, sending yields down seven
basis points to 2.03%, implying that investors were seeking safety
in U.S. government bonds. Yields move inversely to bond prices.
A dearth of data early in the week puts the spotlight squarely
on oil, which has fallen more than 5% Monday. Trading in the euro,
which has dropped to a nearly nine-year low against the dollar,
also has drawn investors' attention.
Despite the dour message being issued by stocks early in the new
year, some analyst appeared to be nonplussed by the dramatic down
swing early in the trading year.
Brian A. Fenske, head of sales trading at ITG, independent
broker based in New York, said equity investors get nervous when
oil prices move up or down quickly, but cautioned not to read too
much into a one-day move.
"In the absence of company-specific news, macro headlines will
affect stock markets, and news around euro stability and falling
oil prices as well as recent levels of bullishness are the reason
we are seeing a pullback," he added.
Indeed, the CBOE Vix index, measuring implied nervousness in
stocks on the S&P 500, jumped 14% to above 20. Every 10% move
on the Wall Street's fear gauge has been associated with a 1% move
in the index.
Eric Scott Hunsader, founder of Nanex, pointed that today's
trading action was unusual as investors were caught off guard by
oil dropping below $50 a barrel.
"Stock investors did expect oil to fall below $60 a barrel, but
oil dropped below $50 too quickly and caught people off guard
triggering selling," Hunsader said.
"Out of 100 most-traded stocks today, 81 were down more than 1%
and 32 more than 5%. It was not as much a panic selling, as lack of
interest from buyers," Hunsader added.
Richard Peterson, senior director at S&P Capital IQ, said
that volatility in the market is expected, but remains optimistic
in the longer term.
"Markets are more on a pause than retreat as concerns over euro
and oil have taken over fundamentals for now. We still expect 11%
fourth-quarter earnings growth for the S&P 500 companies
excluding energy sector, which will drive markets higher," Peterson
added.
Oil and the S&P 500: In turn, a rise in the dollar (DXY) was
weighing on dollar-denominated commodities such as oil, with oil
futures (CLG5) down more than 5%, trading at prices not seen since
mid-2009. Energy stocks sold off and were among the worst
performers on the S&P 500 as oil prices -- which have dropped
about 50% since June -- struggle to find a bottom.
Noble Energy, Inc(NBL) , Diamond Offshore, Drilling Inc (DO) and
Anadarko Petroleum Corp (APC) closed with hefty losses, falling
more than 7%.
Energy sector, the worst-performing sector in 2014 on the
S&P 500, dropped 4% on Monday. Read: Here's who been hurt the
most by the oil-price slide.
Revenue and capital expenditure plans by energy companies "have
been and will continue to be slashed," as a result of the oil-price
drop, said Goldman Sachs analysts in a note. The positive impact of
lower oil prices on profit for non-energy companies is more
difficult to quantify, said Goldman, but its model indicates that
every shift of $10 a barrel in oil prices translates into about $2
a share for S&P 500 index per-share earnings. They expect Brent
crude to average $84 a barrel in 2015.
"Simply put, reduced energy company earnings are more than
offset by higher revenues and margins for many other areas of the
market," said Goldman analysts.
Positioning before the release of December U.S. nonfarm-payrolls
numbers on Friday is seen as driving the market's direction this
week, overshadowing minutes from Federal Reserve's most recent
meeting, due Wednesday, and service-sector data, due Tuesday.
Analysts surveyed by MarketWatch expect another 215,000 jobs were
added last month, and the unemployment rate may decline to
5.7%.
Stocks to Watch: Caterpillar Inc. (CAT) was the Dow Jones
Industrial Average's biggest loser, falling 5.3%, after J.P. Morgan
analysts lowered their rating for the stock to underweight, citing
concerns about Caterpillar's direct exposure to oil and gas and
indirect exposure to mining, U.S. construction and emerging
markets.
Ford Motor Co. (F) and General Motors Co.(GM.XX) shares were hit
on Monday, falling 3.9% and 1.5% respectively, in spite of strong
December sales figures. In the case of Ford, the rise in sales was
less than expected.
Cempra lnc.(CEMP) shares jumped 7.3% following positive results
from a late-stage trial of the oral version of its solithromycin
antibiotic.
Boston Scientific Corp (BSX) shares rose 4.5% after J.P. Morgan
upgraded the stock to overweight from neutral after it lagged peers
in 2014.
For more on today's notable movers, read Movers & Shakers
column.
Other markets: The euro's drop to fresh multiyear lows came
after a Der Spiegel magazine report that Germany is cooling on its
commitment to preventing Greece from exiting the eurozone, though
Berlin officials later insisted the German government expects
Greece to stay with the shared currency. Read: Leading economist
warns of devastating turmoil if Greece leaves the eurozone.
In Asia, mainland Chinese stocks rallied to their highest close
in more than five years, but Japan's Nikkei Average slipped 0.2%.
European stocks swayed between gains and losses. Gold futures
(GCG5) gained ground.
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