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Wall Street closed lower on Tuesday following a spike in crude oil prices. Higher yield on U.S. sovereign bonds higher U.S. dollar index also dented market participants’ confidence on risky assets. like equities. All the three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.6% to close at 34,641.97 after a choppy session. Notably, 20 components of the 30-stock index ended in negative territory, while 10 in green. The tech-heavy Nasdaq Composite finished at 14,020.95, declining 0.1% due to weak performance of large-cap technology stocks.
The S&P 500 dropped 0.4% to end at 4,496.83. Eight out of 11 broad sectors of the benchmark ended in negative territory, while three finished in green. The Financials Select Sector SPDR (XLF) and the Materials Select Sector SPDR (XLB), the Utilities Select Sector SPDR (XLU), the Health Care Select Sector SPDR (XLV) and the Real estate Select Sector SPDR (XLRE) tumbled 1%, 1.9%, 1.5%, 1% and 1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 1.4% to 14.01. A total of 9.54 billion shares were traded on Tuesday, lower than the last 20-session average of 10.26 billion. Decliners outnumbered decliners on the NYSE by a 3.31-to-1 ratio. On Nasdaq, a 2.28-to-1 ratio favored declining issues.
Spike in Crude Oil Prices
Crude oil prices increased following the decision of Saudi Arabia to extent its 1 million barrel per day voluntary crude oil production cut until the end of the year. The state-owned Saudi press agency reported that the nation will produce nearly 9 million barrels of crude oil per day in rest of the year. And will be reviewed on a monthly basis. Production restriction was initiated by Saudi Arabia since July and evaluating it on a monthly basis.
Notably, some OPEC members have initiated voluntary production cut of 1.66 million barrels per day until the end of 2024. Russia, the leader of the OPEC+ coalition, voluntarily reduced exports of crude oil by 500,000 barrels per day in August and 300,000 barrels per day in September. The country has decided to extend its 300,000 barrels per day export restrictions till the end of 2023.
Following the news – the price of global benchmark – the Brent crude oil – futures contract for November delivery was up $1.07 per barrels to $90.07 per barrels. Likewise, the price of U.S. benchmark – the WTI crude oil – futures contract for October delivery was up $1.40 per barrels to $86.95 per barrels.
Investors are concerned that higher crude oil prices will result in higher inflation. Higher oil prices will directly affect transportation sector, which in turn will raise the general price level. This will make the task of the Fed more difficult for a soft landing of the U.S. economy. Moreover, the yield on the benchmark 10-Year U.S. Treasury Note rose 10 basis points to 4.27%. The ICE U.S. dollar Index rose to a six-month high at 104.88.
Economic Data
The Department of Commerce reported that factory orders (both durable and non-durable goods) dropped 2.1% in July, lower-than the consensus estimate of a decline of 2.3%. The metric rose 2.3% in June. Notably, July marked the termination of a four-month positive run of factory orders. New orders for manufactured durable goods was down 5.2% in July while that of manufactured non-durable goods were up 1.1%.
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Stock Market News for Sep 6, 2023
Wall Street closed lower on Tuesday following a spike in crude oil prices. Higher yield on U.S. sovereign bonds higher U.S. dollar index also dented market participants’ confidence on risky assets. like equities. All the three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.6% to close at 34,641.97 after a choppy session. Notably, 20 components of the 30-stock index ended in negative territory, while 10 in green. The tech-heavy Nasdaq Composite finished at 14,020.95, declining 0.1% due to weak performance of large-cap technology stocks.
The S&P 500 dropped 0.4% to end at 4,496.83. Eight out of 11 broad sectors of the benchmark ended in negative territory, while three finished in green. The Financials Select Sector SPDR (XLF) and the Materials Select Sector SPDR (XLB), the Utilities Select Sector SPDR (XLU), the Health Care Select Sector SPDR (XLV) and the Real estate Select Sector SPDR (XLRE) tumbled 1%, 1.9%, 1.5%, 1% and 1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 1.4% to 14.01. A total of 9.54 billion shares were traded on Tuesday, lower than the last 20-session average of 10.26 billion. Decliners outnumbered decliners on the NYSE by a 3.31-to-1 ratio. On Nasdaq, a 2.28-to-1 ratio favored declining issues.
Spike in Crude Oil Prices
Crude oil prices increased following the decision of Saudi Arabia to extent its 1 million barrel per day voluntary crude oil production cut until the end of the year. The state-owned Saudi press agency reported that the nation will produce nearly 9 million barrels of crude oil per day in rest of the year. And will be reviewed on a monthly basis. Production restriction was initiated by Saudi Arabia since July and evaluating it on a monthly basis.
Notably, some OPEC members have initiated voluntary production cut of 1.66 million barrels per day until the end of 2024. Russia, the leader of the OPEC+ coalition, voluntarily reduced exports of crude oil by 500,000 barrels per day in August and 300,000 barrels per day in September. The country has decided to extend its 300,000 barrels per day export restrictions till the end of 2023.
Following the news – the price of global benchmark – the Brent crude oil – futures contract for November delivery was up $1.07 per barrels to $90.07 per barrels. Likewise, the price of U.S. benchmark – the WTI crude oil – futures contract for October delivery was up $1.40 per barrels to $86.95 per barrels.
Following these developments, shares of oil producers, such as EOG Resources Inc. (EOG - Free Report) , Occidental Petroleum Corp. (OXY - Free Report) and Halliburton Co. (HAL - Free Report) surged 1.8%, 2.5% and 2.8%, respectively. All three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Near-Term Concerns
Investors are concerned that higher crude oil prices will result in higher inflation. Higher oil prices will directly affect transportation sector, which in turn will raise the general price level. This will make the task of the Fed more difficult for a soft landing of the U.S. economy. Moreover, the yield on the benchmark 10-Year U.S. Treasury Note rose 10 basis points to 4.27%. The ICE U.S. dollar Index rose to a six-month high at 104.88.
Economic Data
The Department of Commerce reported that factory orders (both durable and non-durable goods) dropped 2.1% in July, lower-than the consensus estimate of a decline of 2.3%. The metric rose 2.3% in June. Notably, July marked the termination of a four-month positive run of factory orders. New orders for manufactured durable goods was down 5.2% in July while that of manufactured non-durable goods were up 1.1%.