Wall Street opened up lower on Wednesday following a big day of gains on Tuesday.
Wednesday, February 18, 2015
Investors were somewhat unenthused by weaker-than-anticipated housing data and inflation reports. Additionally, markets turned their attention back to the global oil oversupply and the price drop continued again. Now investors await minutes from the Federal Reserve’s January meeting, to be released later Wednesday afternoon.
The Labor Department indicated that US wholesale prices dropped 0.8% in January – a record decline that outpaced expectations. In addition, new home construction fell 2% in January under the burden of heavy snow in the Northeast and Midwest.
Stocks were down across the board at Wednesday’s open. The Dow fell 0.18%, the S&P 500 lost 0.16% and the Nasdaq inched 0.04% lower in early trading.
Oil prices exhibit volatility
For most of the second half of 2014, oil prices plummeted with reckless abandon as global oversupply threatened the profit margins of producers worldwide. Recently, that trend let up, if only marginally. But markets have turned their attention back to the oversupply and oil prices notched lower on Wednesday.
With that said, fluctuation is to be expected after oil’s free-fall. The latest drop is not necessarily a sign of more to come as much as an indicator that the market is uncertain.
“The oil market is still fundamentally oversupplied and prices will start to struggle as we enter the second quarter,” Steve Sawyer, analyst at Facts Global Energy, told The Wall Street Journal. “We expect oil prices to come off during March and April. But it’s a roll of the dice by how much.”
Tracking oil prices moving forward is difficult because there are so many interconnected factors at play. OPEC’s stance is a prevailing influence, but so is that of the US. Domestic oil production may slow over the next few decades as a result of alternative resources and better fuel economy. One thing analysts do expect is for the US to work toward self-sufficiency, in which case production from OPEC, Iran and other major players should be less of a burden.
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