Dow Jones Holds Steady at 16,000 as Oil Collapses

Advertisement

U.S. equities moved lower again on Tuesday with lingering worries over the health of Europe’s banking system as the Eurozone debt crisis bubbles back to the surface.

It was a choppy trading session, with large-cap stocks oscillating between gains and losses ahead of Federal Reserve Board Chair Janet Yellen’s semi-annual testimony to Congress on Wednesday.

In the end, the Dow Jones Industrial Average ended with a 0.1% decline, the S&P 500 lost 0.1%, the Nasdaq Composite dropped 0.4% and the Russell 2000 finished the day 0.6% lower.

2-9-16-DJI copy

Treasury bonds were mixed, the dollar was weaker, gold was little changed after the strong rally on Monday and oil fell sharply for a 4% loss to close at $28.50 a barrel. The move in gold boosted the ProShares Ultra Gold (NYSEARCA:UGL) recommended to Edge subscribers to a gain of 11.1% for the month so far. Edge Pro subscribers are enjoying a 425%-plus gain in their Feb $105 Gold Trust SPDR (NYSEARCA:GLD) calls.

Breadth was negative with decliners outpacing advancers 2.3 to 1 on the NYSE. Materials stocks led the way with a 1.2% gain followed by health care and consumer staples. Energy stocks were the laggards, down 2.5%.

The black stuff was hit after the IEA’s monthly report said the global oversupply situation had worsened over the past month, that inventories would likely continue to build into the second half of the year, and hopes of a coordinated OPEC/Russia production cut were likely to come to nothing.

Analysts at Goldman Sachs piled on, saying they wouldn’t be surprised to see crude trade below $20 a barrel on a lack of a supply response to lower prices — as both sovereign budgets and U.S. shale debt payments have spurred producers to increase supply, despite lower selling prices, in a frantic effort to boost revenue.

Cord cutting slammed Viacom (VIAB) 21.5% after reporting a quarterly revenue miss despite better ad revenue. ArcelorMittal SA ADR (NYSE:MT) fell 8.2% after JPMorgan warned of the impact of a lower steel price outlook and restructuring plan risks. Rio Tinto plc ADR (NYSE:RIO) and BHP Billiton Limited ADR (NYSE:BHP) both fell 4.1% after being initiated with a lukewarm outlook by analysts at RBC.

2-9-16-Jobs copy

 

Heading into Yellen’s testimony, all eyes were on today’s Job Openings and Labor Turnover Survey data. Job openings hit 5.6 million in December, the second-best level on record. That pushed the job openings rate to 3.8%, matching the all-time high hit last July. The quits rate — also known as the “take this job and shove it” rate — rose to its highest level since December 2006 at 2.1%.

Overall, the report backs up the idea that the labor market is tightening fast.

That’s great news for American workers waiting for wage inflation to pick up. But it’s bad news for the Fed, which raised rates in December for the first time since 2006, as it is caught between financial market turmoil and evidence of job market healing. And it is terrible news for corporate profitability, as higher unit labor costs is just the latest factor weighing on earnings growth.

2-9-16-RUT copy

Tomorrow, we’ll learn what Yellen thinks about it all. Her commentary will determine whether the Dow can stay above the 16,000 level or will succumb to a possible violation of its August-January low. Remember that the Russell 2000 small-cap index has already returned to 2013 levels, down 25.6% from its June high in what’s a deepening bear market.

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.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/02/dow-jones-crude-oil-jobs/.

©2024 InvestorPlace Media, LLC