You wouldn’t necessarily know it by looking at the flattish closing prices of most commodities on Friday, but the volatility-based interplay of oil, precious metals, the dollar and stocks continued to be the central theme of market action.
While the dollar’s late strength on Friday managed to pull down most of the gains in key commodities, stocks appeared to be headed south independently, and managed to drop to their lowest levels in eight days.
The Dow Jones Industrial Average fell 100 points to 12,596, the Nasdaq lost 35 points to 2828 and the S&P 500 shed 11 points to 1338.
Along with the selloff in stocks came a reversal in the 10-year Treasury note, which had rallied on Thursday. The yield fell to 3.18%, nearly returning to its close on Wednesday.
This being a typical Friday in terms of light corporate and economic newsflow, a host of macroeconomic concerns were available to result in investors feeling a little less chipper about taking on additional risk – the continuing bubbling of a possible Greek debt crisis, a terrorist reprisal in Pakistan, and renewed fears of more to come from Japan’s nuclear power plant.
Despite these factors pushing and pulling the dollar and swinging commodities back and forth, oil ended up modestly higher to nearly $100 a barrel; gold fell 0.9% and silver gained 0.3%.
As we’ve seen on days when commodities aren’t jumping and making like “dead money”, the buzzkill for small-caps was in effect, as investors give up on huge gains in small energy and materials stocks. The Russell 2000 fell 1.4%.
Of course, the consumer price index figures on Friday also were significant enough to keep U.S. stock investors on edge. While a 0.4% rise indicates nothing close to inflationary concerns, the fact that half of that 0.4% came from higher energy prices is enough of a reminder, as retail sales data earlier this week showed, that people have become increasingly less likely to spend their money on things other than food and fuel.
Finally, as a theme we’ve been tracking this week, it’s more than just noteworthy that large financial stocks, as defined by the Financial Select Sector SPDR (NYSE:XLF) exchange-traded fund finished at its lowest level since Dec. 20.
Yes, financial stocks are now down for 2011. The question is, will the rest of the market soon join them?
