U.S. stocks opened lower on Tuesday, following weakness in Europe and Asia, as a fresh dip in the oil price weighed on investor sentiment and the dollar continued to soar.
By Vikram Rangala
Tuesday, March 10, 2015
In the big picture, however, the US stock market has officially entered Year Seven of a bull market that began in 2009. The price of oil dropped Tuesday morning, with Brent Crude losing nearly 1.5 percent to trade at $57.04, while U.S. crude fell to alow of $49.04. It comes after Goldman Sachs said Monday that it expected U.S. crude to drop as far as $40 a barrel in the near-term.
With the anticipation hype over the Apple Watch release now coming to a close, the weakness in crude oil is coming back in focus in two ways: first, the usual worry about energy sector weakness, which may or may not have been part of the overnight drop and second, some fresh buying of energy sector stocks now that they are cheaper.
With the S&P 500 futures (ESH15:CME) down six out of the last eight sessions and the weak close on Friday most traders expected to see weakness going into Monday’s trade. The E-mini traded down to Friday’s 2066 lows during Globex but started to short cover prior to Monday morning’s 8:30 CT open. The Dow futures (YMH15:CBT) closed up 109 points or +0.8%, the S&P 500 futures (ESH15:CME) closed up 7.00 points or +0.50% while the NASDAQ futures (NQH15:CME) closed up 8.50 points or just 0.3%. Yesterday’s gains followed a 1.4% decline in the S&P following Friday’s strong jobs report which raised expectations that the Federal Reserve may raise interest rates as soon as June.
EURO CONTINUES TO FALL
The fall in the euro accelerated Tuesday and bond yields in the eurozone hit fresh lows, showing how the effects of the European Central Bank’s bond-buying program continue to grip the region’s markets. The euro fell over 1% to trade at $1.0735, one day after the ECB began buying government debt in an effort to drive up inflation and boost a fragile economy.
JOLTS AND THE JOB MARKET
January’s JOLTS survey is the major report due today, other than wholesale inventories, which look to be down slightly. The JOLTS is expected to show a further rise in the number of unfilled positions in US companies: over 5 million, the highest level since 2001. A lot of unfilled positions and a lot of people back on the active job market bodes well for the economy as a whole. Some analysts are even calling for unemployment to drop below 4% by 2016.
Earnings expected on Tuesday include Barnes & Noble, the largest U.S. book store chain. Barnes & Noble has faced falling sales of books and Nook tablets. It said it would keep its Nook Digital unit and spin off its college bookstore business.
IRAN AND THE GOP'S ADVICE
In geopolitics, the unprecedented letter from 47 Republican senators telling Iran's government that any nuclear treaty it signs with the Obama administration would probably be ignored by a subsequent GOP administration got some strong rebukes, not just from Vice-President Biden, but also the former Republican chairman of the Senate Foreign Relations Committee Sen. Richard Lugar (R-IN) and other GOP leaders. Whether the letter violates the Logan Act, whichprohibits unauthorized Americans from negotiating with foreign governments in relation to U.S. policy, is an open question. However, the tone of the letter was widely seen as unhelpful.
The letter, written by freshman Senator Tom Cotton ((R-Ark.), begins, "It has come to our attention while observing your nuclear negotiations with our government that you may not fully understand our constitutional system." Sen. Cotton later added a possible insult by tweeting a Farsi copy of the letter with the message "also, in case you need a translation..." Sen. Cotton appears unaware that Iranian President President Hassan Rouhani, and Foreign Minister Javad Zarif have PhDs from universities in Glasgow, Scotland, and Denver, Colorado, respectively.
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