Market Focused on Oil, but Better Than Earnings

The stock market lost ground Thursday due to lower oil prices and concerns over Greece. The Dow fell 0.2% and the S&P 500 was off 0.1%, but the Nasdaq rose 0.4% and the Russell 2000 closed unchanged.

Germany turned down Greece’s request to extend its bailout, which is set to expire at the end of the month. The market appears to be waiting on the outcome of talks, trapped in a very narrow trading range.

Crude oil prices fell 4.4% in the past two sessions to $51.16 a barrel. The Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) fell 0.5%, with Dow stocks Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) off 1.9% and 1.7%, respectively.

Wal-Mart Stores, Inc. (NYSE:WMT) fell 3.2% following an increase in earnings but a shortfall in revenues. The company announced it will give a half-million employees pay raises. T-Mobile US Inc (NYSE:TMUS) rose 2.7% after it delivered better-than-expected quarterly revenue and profits.

Financial stocks lost ground with American Express Company (NYSE:AXP) off 1.7%, JPMorgan Chase & Co. (NYSE:JPM) down 0.2% and Wells Fargo & Co (NYSE:WFC) losing 0.1%.

Weekly initial claims fell to 283,000 against an expected drop to 295,000. Continuing claims increased to 2.425 million, up from a revised 2.367 million. Leading economic indicators increased 0.2% in January, while analysts had been anticipating 0.3%.

Gold futures rose 0.6% to $1,207.10 an ounce. The price of the 10-year Treasury note fell causing rates to rise to 2.11% from 2.07% on Wednesday.

At Thursday’s close, the Dow Jones Industrial Average was off 44 points at 17,986, the S&P 500 fell 2 points to 2,097, the Nasdaq gained 18 points at 4,925, and the Russell 2000 was unchanged at 1,228.

The NYSE traded a total of 3.2 billion shares, and the Nasdaq crossed 1.6 billion. On the Big Board, decliners were slightly ahead of advancers, and on the Nasdaq, advancers were ahead by 1.2-to-1.

VIX Chart
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Since the December-January market decline, the VOLATILITY S&P 500 (INDEXCBOE:VIX) has been falling. This is an indication that traders are disinterested in the “risk-off” strategy of using put options as insurance and usually indicates that stocks are heading higher.

IWM Chart
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Chart Key

iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) popped above a support band at $119 to $121. But declining volume is more reminiscent of summer and holiday trading than mid-February.


Although small- and mid-cap stocks seem to be catching slightly more attention than the S&P 500 and Dow industrials, I am keeping an eye on the S&P 500. It is the benchmark index, but so far in February, it has provided more slumber than energy.

And speaking of energy, the market has been following crude oil prices. Raymond James’ Jeff Saut mentioned that oil has been the key to this market. This struck a bell with me because he also noted that Gerald Loeb, a founder of a firm of fond memories — EF Hutton — said to him, “Whenever you find the key to the market; they change the locks!”

The locks have not yet been changed, and so far stocks have almost mirrored the daily movements in the price of oil.

Some have been wishing for a switch to a focus on earnings, but not so fast. When the consensus estimate for S&P 500 earnings has been reduced to $119 from $137, are we sure that we want to go that route?

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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