After yesterday’s dramatic sell-off on the first trading day of the year, U.S. stocks briefly recovered this morning but have since failed to gain traction after China moved to stabilize its financial markets.
By Paolo Palazzi-Xirinachs
Tuesday, January 5, 2016
Investors also focused on renewed selling in crude, possibly exacerbated by tensions between Iran and Saudi Arabia. Weaker-than-forecast American auto sales numbers and the euro slumping to its lowest level in a month have also stalled today’s potential rebound.
Global stocks plunged on Monday, with the Dow making its worst start to a year since 2008, after weak factory data out of China and the United States spooked investors coming off the New Year long weekend. The slide prompted the People's Bank of China to inject $20 billion in a bid to stabilize its markets. The prevailing market sentiment is that the sell-off may have been an overreaction, and that investors would soon follow the general trading maxim of “Buy the dip! Don't sell the rip.”
While yesterday’s rout was unexpected, the mood of the markets entering the new year seemed to be that there will not be any major catalysts to warrant fear of a recession. While investors don’t anticipate deep declines in the U.S. economy, for the moment the market doesn’t see any catalysts for an upside either.
In commodities, oil has dropped to a two-week low on speculation that a government report will show U.S. crude inventories climbed. West Texas Intermediate for February delivery fell 1.2% to $36.30 a barrel in New York. Futures touched $36.05, the lowest since Dec. 22. Oil capped the biggest two-year loss on record in 2015 as ample U.S. stockpiles (brought on by cheap oil and an unusually warm winter in Europe and North America) sustained a supply glut and the Organization of Petroleum Exporting Countries effectively abandoned production limits. Gold has rallied a second day at the start of a month that’s been the strongest for the metal in recent years. Bullion rose on Tuesday as Middle East tensions and a selloff in global stock markets spurred haven demand.
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