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Stock Market News For Nov 12, 2018

Wall Street closed sharply lower on Friday as the U.S. crude price plunged below a key psychological barrier escalating concerns of a global growth slowdown

Wall Street closed sharply lower on Friday as the U.S. crude price plunged below a key psychological barrier escalating concerns of a global growth slowdown. Moreover, significant decline of auto sales in China and a jump in the U.S. producer’s price index also dented investor confidence. All three major stock indexes ended in the red despite showing strong performance throughout the week.

The Dow Jones Industrial Average (DJI) closed at 25,989.30, shedding 0.8% or 201.92 points. The S&P 500 Index (INX) declined 0.9% to close at 2,781.01. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,406.90, dropping 1.7% or 123.98 points. A total of 7.93 billion shares were traded on Friday, lower than the last 20-session average of 8.39 billion shares. Decliners outnumbered advancers on the NYSE by 2.22-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 2.95-to-1 ratio.  The CBOE VIX increased 3.8% to close at 17.36.  

How Did the Benchmarks Perform?

The Dow ended in negative territory reversing its four-day winning streak. Notably, 19 components of the 30-stock blue-chip index closed in the red while the remaining 11 finished in the green. The tech-laden Nasdaq Composite closed in negative territory for second successive days, due to weak performance of large-cap technology stocks.

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Meanwhile, the S&P 500 also closed in the red for second successive days. Communication Services Select Sector SPDR (XLC) and Technology Select Sector SPDR (XLK) lost 2.1% and 1.7%, respectively. Notably, eight out of total 11 sectors of the benchmark index closed in the red while three finished in the green.

U.S. Crude Oil Price Fell Below Psychological Barrier

On Nov 9, U.S. benchmark West Texas Intermediate (WTI) crude oil future price for December delivery fell $0.48 or 0.8% to settle at $60.19 a barrel on the New York Mercantile Exchange. This was the tenth straight loss for the U.S. benchmark crude prices and its lowest close since Mar 8. Moreover, at its intraday low, WTI crude oil price plunged 1.2% to $59.93 per barrel, below a key psychological barrier of $60.

For the week, the WTI shed 4.7%, reflecting its fifth consecutive weekly decline. The last time, the WTI crude oil prices dropped for 10 straight days was on Jul 18-31, 1984. Notably, on Nov 8, WTI Crude oil entered into bear market as price plummeted more than 20% from its recent peak recorded at Oct 3.

Furthermore, the global benchmark of Brent crude oil is also hovering around bear market territory. According to industry researchers, surge in global oil supply, especially  from the United States, Russia and Saudi Arabia, and shortage of global oil demand is the reason for oil price plunge.

Concerns Over Global Economic Growth 

Recent nosedive of crude prices has raised eyebrows about an impending global economic slowdown. At the forefront, is renewed concern about Chinese economic prospects. On Nov 8, the China Association of Automobile Manufacturers (CAAM) reported that the country’s automobile sales fell 11.7% in October. This figure pushed China closer to an annual auto sales contraction which was last evidenced in 1990. Notably, China is the biggest car market in the world.

Moreover, the U.S. government has warned that if China disagrees to accept U.S. terms and conditions about bilateral trade in the upcoming meeting between President Donald Trump and Chinese leader Xi Jinping later this month, then the U.S. government may impose tariffs on all remain Chinese products worth $267 billion in the first week of December. As perLouis Kuijs, head of Asia Economics at Oxford, continuation of trade war will result in a potential slowdown in China’s domestic demand for goods from other Asian countries, resulting in global economic slowdown.

Consequently, shares of trade sensitive stocks like Caterpillar Inc. CAT and General Motors Co. GM were down by 3.4% and 2.4%, respectively. General Motors carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inflation Fears Reignite

On Nov 9, the Department of Labor reported that U.S. producer’s price index for the month of October jumped to 0.6% from 0.2% in September. October reading was also higher than the consensus estimate of a rise of 0.3%.

Surge in producer’s price index once again intensified inflationary concerns which the Fed is likely to control with a tight monetary stance. On Nov 8, the central bank hinted at a fourth rate hike this year. Higher interest rate may again create panic in stock markets.

Weekly Roundup

The first week of November was an impressive one for Wall Street after a devastating October. All three major stock indexes posted significant gains. The Dow advanced 2.8%, marking its best week since the week of Mar 9. Meanwhile, the S&P 500 and Nasdaq Composite also rose 2.1% and 0.7%, respectively.

In the first three days stock markets gained on midterm Congressional election and its results. Investors’ optimism has been since U.S. Congress is now divided with Republicans strengthening their hold on the Senate while Democrats have regained control of the House of Representatives after eight years.

However, the market lost its momentum and closed in the red in the last two days as the U.S. crude price plunged below its psychological barrier, more evidence on Chinese economic slowdown sparking fears of a global growth slowdown and the Fed’s signal for a rate hike in December.

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