U.S. equities pulled back on Tuesday as crude oil remained in focus, dropping on Russian production numbers and increasing doubts about a “grand bargain” between OPEC and non-OPEC suppliers to relieve the chronic global oversupply situation.
In the end, the Dow Jones Industrial Average lost 1.8%, the S&P 500 fell 1.9%, the Nasdaq Composite shed 2.2% and the Russell 2000 finished off 2.3% lower.
Treasury bonds were weaker, the dollar moved lower, gold gained 0.2% and crude oil lost 5.5% to close at $29.89 a barrel — moving below the $30 threshold for the first time since Jan. 26 and capping the worst two-day drop since January 2009.
The Wall Street Journal cited delegates who said that Persian Gulf states don’t support an emergency OPEC meeting, preferring to wait until the scheduled meeting in June to get a better idea of where Iranian supply will be. Separately, Russian production increased to a post-Soviet high of 10.9 million barrels per day in January.
Defensive utility stocks led the way with a 0.4% gain. Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) gained 1.7% after reporting a fourth-quarter earnings per share beat thanks to mobile ad sales. Elsewhere, Toymaker Mattel, Inc. (NASDAQ:MAT) gained 13.8% thanks to a top- and bottom-line quarterly beat.
After the close, Yahoo! Inc. (NASDAQ:YHOO) dropped 0.4% in extended trading in the wake of reporting in-line earnings on better-than-expected revenues (down 15% from last year). Management also said it was exploring strategic alternatives to separate its stake in Alibaba Group Holding Ltd (NYSE:BABA) from its core operations.
Investors remains frustrated as doubts grow over the ability of CEO Marissa Mayer to turn things around.
While stocks are set up for a continuation of the recent oversold rally out of the January lows, financial stocks (and financial credit) are getting hit hard on rising fears of U.S. shale sector bond and loan defaults. Much depends on Friday’s payroll report, and whether it will press the Federal Reserve to delay its rate hike schedule for 2016.
If so, weakness in the dollar could help crude oil stabilize, push up lowered inflation expectations, and help gold and silver maintain their recent upward momentum.
That’ll also help gold and silver stocks like Barrick Gold Corporation (NYSE:ABX), which gained more than 35% for Edge subscribers in January.
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.
