Oil prices sink again as post-elec­tion stock surge fades

The Trentonian (Trenton, NJ) - - BUSINESS - By Mar­ley Jay

NEW YORK >> Stocks in the U.S. slipped Thurs­day as the ninth con­sec­u­tive drop in crude oil prices hurt en­ergy com­pa­nies. U.S. mar­kets were com­ing off huge gains the day be­fore.

U.S. crude oil has now slumped more than 20 per­cent since early Oc­to­ber, meet­ing Wall Street’s def­i­ni­tion of a “bear mar­ket.”

Govern­ment fuel stock­piles have steadily ex­panded, push­ing sup­plies higher, and the U.S. is­sued waivers to a num­ber of coun­tries that buy oil from Iran. That al­lows those coun­tries to keep im­port­ing Ira­nian oil in spite of re­newed sanc­tions on that coun­try.

Most other groups of stocks fin­ished lit­tle changed. Banks made the largest gains. The Fed­eral Re­serve left in­ter­est rates where they are, but sug­gested it plans to keep rais­ing rates in re­sponse to the strong U.S. econ­omy.

After its steep plunge in Oc­to­ber, the S&P had risen for six of the seven days end­ing on Wed­nes­day. Stocks started sink­ing last month be­cause in­vestors wor­ried that the Fed was go­ing to raise in­ter­est rates to the point they slowed down eco­nomic growth. But John Lynch, chief in­vest­ment strate­gist at LPL Re­search, said he doesn’t think that’s go­ing to hap­pen and that the Fed will stop rais­ing rates in 2019.

“We do not be­lieve they will be as ag­gres­sive as many fear,” he said. “We still don’t have any­thing ap­proach­ing the wage pres­sures that have his­tor­i­cally scared the Fed.”

The S&P 500 in­dex shed 7.06 points, or 0.3 per­cent, to 2,806.83 after it jumped 2.1 per­cent Wed­nes­day. The Dow Jones In­dus­trial Aver­age inched up 10.92 points to 26,191.22.

The Nas­daq com­pos­ite dipped 39.87 points, or 0.5 per­cent, to 7,530.88 after a 2.6 per­cent surge a day ear­lier. The Rus­sell 200 in­dex of smaller-com­pany stocks fell 3.95 points, or 0.2 per­cent, to 1,578.21.

Bench­mark U.S. crude oil fell 1.6 per­cent to $60.67 a bar­rel in New York. On Oct. 3 it closed at $76.41, the high­est level in al­most four years.

Brent crude lost 2 per­cent to $70.65 a bar­rel in Lon­don. Brent crude is the stan­dard for in­ter­na­tional oil prices and it has also fallen sharply over the last five weeks.

Exxon Mo­bil fell 1.6 per­cent to $81.71 and Cono­coPhillips gave up 4.5 per­cent to $119.36.

Bond prices edged lower. The yield on the 10-year Trea­sury note rose to 3.24 per­cent, near its high­est level this year, from 3.23 per­cent. The Fed­eral Re­serve left in­ter­est rates where they are, but sug­gested it plans to keep rais­ing them in re­sponse to the strong U.S. econ­omy. The Fed has raised its key rate eight times since late 2015 and is ex­pected to do so again in De­cem­ber, with sev­eral more in­creases to fol­low.

Bank of Amer­ica rose 1.2 per­cent to $28.87 and M&T Bank added 1.2 per­cent to $167.37.

The Fed has been rais­ing rates to pre­vent in­fla­tion from get­ting out of hand. Lynch, of LPL, said that in­fla­tion isn’t go­ing to get much stronger be­cause wages aren’t go­ing to grow much faster than they cur­rently are. He said fac­tors like the re­tire­ment of more Baby Boomers, global com­pe­ti­tion, and slower eco­nomic growth in the U.S. will all limit in­creases in pay.

Chip­maker Qual­comm had a strong fourth quar­ter, but for the cur­rent pe­riod it’s pro­ject­ing rev­enue of $4.5 bil­lion to $5.3 bil­lion, far be­low the $5.6 bil­lion an­a­lysts ex­pected, ac­cord­ing to Fac­tSet. Its stock lost 8.2 per­cent to $58.05.

Ap­ple stopped mak­ing roy­alty pay­ments to Qual­comm fol­low­ing a dis­pute be­tween the com­pa­nies, and later de­cided to stop us­ing Qual­comm modems in some of its prod­ucts. Qual­comm said both of those changes have hurt its re­sults.

D.R. Hor­ton, one of the largest home­builders, fell 9 per­cent to $34.22 after its earn­ings and sales fell short of Wall Street fore­casts. The com­pany said ris­ing home prices and mort­gage rates are af­fect­ing de­mand. That ex­act com­bi­na­tion has been weigh­ing on home sales and the stocks all year. Pul­teGroup fell 3.5 per­cent to $24.23 and Len­nar lost 2.5 per­cent to $41.90.

Wynn Re­sorts dropped 13.1 per­cent to $99.02 after the casino op­er­a­tor said its busi­ness in Ma­cau has slowed down re­cently.

Stocks climbed Wed­nes­day after the midterm elec­tions gen­er­ally went the way in­vestors thought they would. The Democrats took con­trol of the House of Rep­re­sen­ta­tives while the Repub­li­cans held on to a ma­jor­ity in the Se­nate. That means that pol­i­tics ap­pears that much less likely to crowd out the per­for­mance of the strong U.S. econ­omy.

In other com­modi­ties trad­ing, whole­sale ga­so­line was lit­tle changed at $1.64 a gal­lon. Heat­ing oil dropped 3.1 per­cent to $2.17 a gal­lon. Nat­u­ral gas edged down to $3.54 per 1,000 cu­bic feet.

AP PHOTO/RICHARD DREW

Trader Wil­liam Lawrence works on the floor of the New York Stock Ex­change.

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