Oil prices keep plummeting as OPEC starts a price war with the US
Adam Shell, USA TODAY Stocks ended mostly lower -- but with the Dow eking out a new record close -- as Wall Street separated the winners and losers tied to nosediving oil prices and kept a close tabs on Black Friday sales. The Standard & Poor's 500 also managed to log a six-week winning streak.
A barrel of Texas Intermediate crude was at $67.17 Friday afternoon Eastern Time -- a whopping 8.9% drop.
At the 1 p.m. close of the abbreviated, post-Thanksgiving session, the Dow Jones industrial average stood fractionally higher, settling at its new record of 17,828.24, passing the level set in the previous session by a half-point. It is the 31st record close for the Dow of 2014.
The S&P 500 ended down 0.3%, while the Nasdaq composite gained 0.1%. All three indexes have climbed for six weeks straight. It's the longest climb for the three market measures since an 8-week winning streak that ended in November 2013.
The apparent takeaway from Wall Street: lower oil prices benefit more businesses than it hurts and has a massive positive impact on consumers' disposable income.
"'Tis the season: energy down, consumer up," is the way Strategas Research Partners summed up the energy math.
Says Strategas analyst Nicholas Bohnsack: "The continued decline in the price of crude oil and the resulting savings at the gas pump will likely continue to bolster consumer shares as the market anticipates the positive implications on consumer spending."
Citing data from the Financial Times, Bohnsack says Americans consume 135 billion gallons of gasoline per year. With retail prices down $0.85 per gallon to roughly $2.78, from $3.64 in June, the consumer is on pace to generate an estimated $115 billion in savings from lower petrol expenditures, he noted in his report to clients.
Investors are grappling with the fallout of yesterday's decision by OPEC to not cut its daily crude production despite a glut of oil around the globe. Oil prices, which were already under pressure due to weaker demand due to a sluggish global economy and ample new supply coming online in the U.S., are plunging anew today after the OPEC decision.
"The selling in oil was epic, with contracts rolling over from $73.50 to $67.75 on WTI in about an hour," earlier Friday morning, said Paul Hickey, co-founder of Bespoke Investment Group.
The overall stock market is not likely to get crushed due to plunging oil prices as there are many companies -- namely consumer stocks, airlines, transportation names, cruise lines – that will benefit from lower oil prices. The Dow, however, might suffer a bit more than the broader stock indexes because both Exxon-Mobil and Chevron are Dow components and are down more than 4% in pre-market trading.
There are winners and losers related to crude plunging to a fresh 4½ year low.
Airline shares are soaring and energy stocks are tanking in pre-market trading in response to lower oil prices following the OPEC decision not to cut production amid an oil glut.
The big beneficiaries of lower energy costs are U.S. air carriers. Airlines ranging from American Airlines to United Continental saw their shares rise 4% to 5% as investors price in bigger profits due to lower costs for fuel. In contrast, energy shares, including oil-and-exploration companies like Exxon-Mobil and oil services players like Halliburton, which is down more than 4% in pre-market trade, are seeing their shares take a big hit.
Aside from the oil pits, it's all about Black Friday today.
"Outside of commodities,Wal-Mart and its fellow retailers will be in the limelight in today's holiday-shortened session, as traders watch for early signs of Black Friday success," said Andrea Kramer, an analyst at Schaeffer's Investment Research.
end quote from:
Dow ekes out record close; oil plummets 8.9%
No comments:
Post a Comment