U.S. equities closed lower on Monday in a rare show of weakness with small-cap stocks breaking a streak of 15 straight gains. This was mainly driven by nervousness about the odds of a possible OPEC production freeze agreement.
That ends the longest winning streak since 1996 for a total gain of 16.5%, helped by the focus of smaller companies on domestic customers (poised to benefit most from President-elect Trump) as well as a focus on smaller, regional financials (rising on net interest margin gains from higher long-term interest rates).
In the end, the Dow Jones Industrial Average lost 0.3%, the S&P 500 Index dropped 0.5%, the Nasdaq Composite gave back 0.6% and the Russell 2000 finished lower by 1.3%. Treasury bonds were stronger, the dollar was weaker and gold gained 1.1%. All these moves were reversals of recent trends. Crude oil gained 2.2% recovering from overnight weakness amid a heavy flow of OPEC-related headlines, boosting the ProShares Ultra Crude Oil (NYSEARCA:UCO) recommended to Edge subscribers to a 11% gain since recommended on Nov. 10.
A statement on Sunday from Saudi Energy Minister al-Falih saying the oil market would balance itself in 2017, even without a production cut, weighed on prices earlier in the session. As did reports suggesting Saudi Arabia, Iran and Iraq remain unable to bridge their differences on where post-freeze production levels should be set (Iraq wants more output to help fight ISIS while Iran wants a return to pre-sanctions output levels).
Late-session strength was driven by comments from Iraq’s oil minister al-Luaibi saying he was “optimistic” a deal could be reached and pledged to cooperate with the cartel and a report that Russian President Putin, in a call with Iranian President Rouhani, agreed to coordinate on output levels.
All eyes are on Wednesday minister-meeting for a firm result. Capital Economics believes that at the very least a face-saving agreement will be announced. But enforcement is unlikely to be strong.
Thanks to the strength in the bond market, yield-sensitive stocks led the way with utilities up 2% while financials fell 1.4%. Time Inc (NYSE:TIME) gained nearly 18% after the NY Post reported the company rejected an $18-a-share bid. Citigroup Inc (NYSE:C) fell 2.3% on a downgrade from analysts at Jefferies citing risks from potential tax policy changes.
Surveying the results from Black Friday shopping and the start of the holiday shopping season, the National Retail Federation said some 154 million people shopped over the Thanksgiving weekend, up from 2015’s 151 million result. Average spending per person declined to $289 from $299 last year. Migration to online shopping continued, with brick-and-mortar sales down 1% according to the NRF while RetailNext data showed a larger drop of 5%.
There is some evidence of consumer pessimism, however, with NRF’s data showing one-third of shoppers said 100% of their purchases were on sale.
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.
