Dow Jones Edges Lower as Crude Oil Slides

A few traders returned to Wall Street on Monday, although volumes remain light as 2015 draws to a close. A 3.7% drop in crude oil, to $36.71 a barrel, was the day’s big event on concerns over China’s economic health as well as comments out of Iran reiterating an intent to add 500,000 barrels per day of new exports within a week of sanctions being removed.

In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost 0.2%, the Nasdaq Composite lost 0.2%, and the Russell 2000 lost 0.6%.

One-time new-tech favorite 3D Systems Corporation (DDD) lost 9.2% after discontinuing its Cube consumer 3D printer and announcing a shift away from consumer products. Walt Disney Co (DIS) gained 1.3% after the new Star Wars movie became the fastest to reach the $1 billion mark, doing so in only 12 days. Wearables maker Fitbit Inc (FIT) gained 3.3% after rising to the No. 1 spot in Apple’s (AAPL) App Store on Christmas Day.

On the economic front, the Dallas Fed Manufacturing Activity index dropped to its lowest reading since May, dragged down by a decline in new orders. Russia’s economy shrank in November on a monthly basis for the first time in five months. Japan saw retail sales suffer declines on a monthly and annual basis. And Chinese industrial profits dropped in November for the sixth straight month.

For now, stocks remain in a vulnerable-looking holding pattern, with the Dow Jones falling back below its 50- and 200-day moving averages. Don’t expect much movement until a few days into 2016 when recent concerns about low commodity prices, stalled corporate earnings growth, rising interest rates, troubles in China and recent weak economic data will resurface.

122815-citigroup

The chart above, of the Citigroup Economic Surprise Index, shows how U.S. economic data is missing expectations in a way that hasn’t been seen since the beginning of the year. Stocks have historically underperformed when this happens — but the relationship has been more or less broken since the Fed launched the QE3 bond buying stimulus in 2012.

With rates moving higher for the first time since 2006, will 2016 be the year the weak stocks/weak economy relationship is restored?

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

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