U.S. equities moved lower on Monday in relatively light trading, as OPEC’s lack of a production cut at its Friday meeting continued to hit crude oil, which lost 5.6% to close at $37.73 — falling below its August low to hit fresh six-year lows.
OPEC has maintained a production ceiling of 30 million barrels per day since 2011, although actual current production is nearer to 31.5 million, as quotas are flouted on the margins. With Iranian crude oil coming back into the market and U.S. production steady, prices look set for more weakness.
In the end, the Dow Jones Industrial Average lost 0.7%, the S&P 500 fell 0.7%, the Nasdaq Composite dropped 0.8% and the Russell 2000 ended 1.6% lower.
Defensive telecom stocks led the way with a 0.6% gain, followed by utilities, up 0.3%. Energy stocks led the decliners, down 3.7%, with Exxon Mobil Corporation (NYSE:XOM) down 2.6% and Chevron Corporation (NYSE:CVX) off 2.7%.
Keurig Green Mountain Inc (NASDAQ:GMCR) soared 71.9% after agreeing to be acquired by JAB Group for $92 a share in cash in a $13.9 billion deal representing a 78% premium to the prior closing price. Wearables maker Fitbit Inc (NYSE:FIT) gained 2%, with positive coverage in the Wall Street Journal highlighting its ability to undercut the Apple Watch in one of the few hot retail areas d this holiday season.
Office Depot Inc. (NASDAQ:ODP) lost 15.8% on reports that the Federal Trade Commission is challenging its proposed merger with Staples, Inc. (NASDAQ:SPLS) on competition concerns.
On the economic front, the chatter is shifting from the timing of the Federal Reserve’s first interest rate hike since 2006 (odds of a hike later this month stand at 79% based on futures market pricing) to what comes afterwards. Currently, the market expects only two additional rate hikes in 2016.
That will depend, in large part, on the pace of wage inflation in the new year. We’ll get an update on producer price inflation on Friday along with the November retail sales report as the 2015 holiday shopping season rolls on.
I continue to recommend subscribers nibble on defensive positions here such as the VelocityShares 2x VIX (NASDAQ:TVIX), which gained 4.2% today for Edge subscribers.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
