In a roller-coaster ride for investors, the Dow Jones drops closed 195 points lower on Tuesday, with the S&P 500 also experiencing a 0.4% dip, and the Nasdaq finishing just below the flatline. These fluctuations were primarily driven by higher crude oil prices and concerns about the global economy, following a recent PMI report indicating a slower expansion in China’s services output, the weakest in eight months. In this article, we’ll delve into the factors impacting the markets and provide insights into the latest developments.
Oil Prices Soar
One of the most notable market movers was the energy sector, which experienced a significant boost as oil prices surged. Saudi Arabia and Russia announced their decision to extend supply cuts, leading to a rally in energy-related stocks. Occidental Petroleum, Permian Resources, and Liberty Energy saw gains of 2.5%, 1.3%, and an impressive 7.6%, respectively. Chevron also joined the rally with a 1.3% increase.
S&P 500 Inclusions
Airbnb and Blackstone made headlines by climbing 7.2% and 3.6% in stock value, respectively, following the announcement that both companies will join the S&P 500 on September 18th. This development reflects investor optimism in these companies’ future prospects.
Tesla, the electric vehicle manufacturer, advanced by 4.7% after reports indicated a rebound in production at its Shanghai manufacturing plant in August. This positive news contributed to the company’s stock performance.
US Economy Resilience
Despite market fluctuations, the US economy continues to demonstrate resilience. The yield on the US 10-year Treasury note climbed above 4.2% as traders returned from a long weekend and reassessed the monetary policy outlook. Favorable economic data, including better-than-expected factory orders, suggests that a recession may be avoided. The ISM Services PMI data, due later in the week, will be closely watched for further insights into the economy’s health.
Federal Reserve Watch
Traders are closely monitoring speeches from several Federal Reserve officials this week. Governor Wallace’s statement on Tuesday emphasized proceeding carefully with rate hikes. While the Fed is expected to maintain the fed funds rate this month, the odds of a quarter-point hike currently stand at 40% for November and 37% for December.
British Pound’s Decline
The British pound fell below $1.26, nearing its lowest level in three months. This decline is attributed to a deteriorating growth outlook in the UK, raising the likelihood that the Bank of England may conclude its monetary policy tightening measures. The updated S&P Global/CIPS UK Composite PMI revealed a decline in private sector output in August, further fueling these concerns. The Bank of England is expected to deliver a 25 basis point rate hike later this month, with markets pricing in another hike to 5.75% by early next year.
Currency Market Overview
In the currency market, the top losers include the Polish Zloty (-1.35%), Mexican Peso (-1.25%), and Australian Dollar (-1.19%). Conversely, the Dollar Index gained 0.53%.
Corn Futures Rebound
Corn futures showed signs of rebounding, reaching $4.7 per bushel, following a near-three-year low of $4.61 touched on August 31st. Unfavorable weather conditions in the US corn belt, including excessive heat, limited yields during the country’s harvest, leading to concerns about supply falling short of expectations.
The hot weather led to low water levels in the Mississippi River, impacting corn transportation. Corn futures remain down 29% this year due to ample global supply and increased Brazilian exports. Brazil has emerged as the top exporter of corn, with a projected 16% surge in exports for the next marketing year. Despite a recent rebound, the corn market continues to face challenges caused by weather conditions and competitive global trade.
Market dynamics continue to evolve as investors navigate through various factors, including oil prices, corporate developments, and global economic concerns. While the US economy remains robust, international factors, such as China’s economic performance and the British pound’s decline, are adding complexity to the global market landscape. Investors will closely monitor upcoming data releases and Federal Reserve communications for further insights into market direction.
ORCL – Take profit up to @120.08:
MIRM – place Stop loss order @25.71:
CRWD position closed with 3.05% profit:
AEYE – place Stop loss order @4.57:
The total pre-tax profit of closed positions is 0.60%.