Weaker oil, metal prices send stocks lower for a second day

Stocks closed lower for a second straight day Wednesday, dragged down by lower energy and commodities prices, with all three major U.S. indexes falling about 0.5%. Within the S&P 500, stocks in the energy (-1.2%) and materials (-1.5%) sectors showed the most weakness, although of ten market sectors only financials (+0.3%) managed a gain and four S&P stocks fell for every one advancing. European stocks continued to exhibit elevated volatility, dropping about twice as much as U.S. indexes, with the Stoxx Europe 600, the DAX  and the CAC 40 all falling 1.1%.

A key contributor to today’s stock selloff was a drop in oil prices, which fell more than 1.5% on the day. Nymex crude futures fell about $1.80 a barrel to $105.50 (WTI), as the U.S. Energy Information Administration reported that U.S. crude oil stockpiles rose by 7 million barrels last week to a seven-month high. Analysts had expected an increase of only 2 million barrels. At the same time, there were new reports out of Paris that the French government was considering releasing oil reserves in an effort to ease high crude and gasoline prices. Metals prices were also down Wednesday, with gold and silver futures both falling more than 1% and copper falling nearly 2%.

Energy and commodities prices were also pressured by this morning’s durable goods orders report for February, which was better than January’s but weaker than Street estimates. Orders rose 2.2%, a big improvement from the prior month’s 3.6% decline, but that was less than the 3% increase analysts were expecting. Excluding transportation, orders rose 1.6%, in line with Street forecasts and well ahead of January’s 3% decline.

Treasury bond prices were modestly lower on the day. The yield on the 30-year bond rose about one basis point, to 3.31%, while the 10-year note rose two bps, to 2.20%. Fed Chairman Ben Bernanke once again tried to soft-peddle the U.S. economy recovery. According to a transcript of an interview he gave ABC News Tuesday night, released this morning, Bernanke said “It’s far too early to declare victory. The recent news has been good. But I think we need to be cautious and make sure this is sustainable. And we haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.”

Reports/dates/facts/links worth paying attention to over the next week:

  1. March 29: Second revision for Q4 2011 GDP; unemployment claims; Q4 2011 corporate profits; fourth and final Bernanke lecture at GWU.
  2. March 30: Personal income and outlays for February; UofM consumer sentiment.
  3. Part 3 of Bernanke’s GWU lectures: Reflections on the Federal Reserve and its Place in Today’s Economy

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

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