U.S. equities were fairly quiet on Wednesday, with large caps taking a break while tech stocks and small caps ran higher. Investors instead focused on the happenings in the energy space, with crude oil trading choppily on OPEC-related headlines and new inventory data.
The Federal Reserve is also getting some attention, with Board Chair Janet Yellen speaking to Congress later this week, as futures market odds of a December rate hike push above 90%.
In the end, the Dow Jones Industrial Average lost 0.3% (the first decline since before Election Day), the S&P 500 Index lost 0.2%, the Nasdaq Composite gained 0.4% and the Russell 2000 was unchanged. Elsewhere, Treasury bonds were little changed, the dollar was stronger to push near 13-year highs, gold was relatively flat and oil fell 0.5% after trading in positive territory earlier in the session.
Telecom and technology stocks led the way with gains of 1% and 0.9%, respectively.
Watchmaker Fossil Group Inc (NASDAQ:FOSL) gained 8.4% after being upgraded by analysts at KeyBanc on the belief results are near an inflection point as the company enjoys momentum in wearables. Target Corporation (NYSE:TGT) gained 6.4% on a third-quarter earnings per share beat with comp-store sales not as bad as feared, down 0.2%. Walt Disney Co (NYSE:DIS) gained 1.5% after an update by Deutsche Bank on a stabilization in its ESPN subscriptions and optimism about parks and resort growth.
Financials and energy were the laggards, down 1.4% and 0.9%, respectively.
Crude oil failed to follow up on Tuesday’s big 6% rally. This after the reporting of a large 5.3-million-barrel rise in U.S. inventories when just a 1 million rise was expected. Adding to the pressure was word Iran, Iraq and Nigeria wouldn’t attend an “informal” meeting of OPEC officials in Doha this week.
Tuesday’s rally was driven by reports Russia will reportedly attend that Doha meeting. After a rough production freeze deal was hammered out in Algiers last month — secured only by Saudi Arabia’s willingness to shoulder production cuts to get the Iranians to the table — the details are supposed to be ironed out later this month.
Hopes had dimmed somewhat in the wake of recalcitrance from the Iraqis over what they claimed was overstated production data. But now, investors are excited at the prospect that Russia could possibly add its name to the production agreement.
With OPEC officials teasing a production freeze deal since February, the market will soon demand something tangible. For now, however, well placed headlines and a large short position in oil futures are all that’s needed to give the energy sector a boost despite Wednesday’s setback.
In preparation, I have recommended positions including a new position in the Exxon Mobil Corporation (NYSE:XOM) Dec $87.50 calls to my Edge Pro subscribers in preparation of a breakout from a multi-month consolidation range.
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.
