Us Stocks React To Oil Slide

Us Stocks React To Oil Slide

US stocks opened higher on Tuesday, but oil’s price slide could limit progress.

Us Stocks React To Oil Slide
Us Stocks React To Oil Slide

Stocks on the US market tested positive territory on Tuesday, but a continued slide in oil prices will likely temper any gains, according to MarketWatch. On Monday, Wall Street largely sold stocks amid the oil price drop and a dollar value increase. Investors hoped the market would gain back those losses on Tuesday, but some analysts have their doubts.

“One would question whether this is ‘Turnaround’ Tuesday or simply a pause before the next leg down,” Brenda Kelly, chief market strategist at IG, told MarketWatch. “The plunge in equities yesterday was unexpectedly extreme, so we may be witnessing some profit-taking and an element of bargain-hunting … [W]e are still in a low-interest-rate environment, and as has been the case for the past few months, risky assets provide a yield that cannot be gleaned elsewhere.”

The S&P 500 increased 0.15%, the Nasdaq gained 0.23% and the Dow added just under 0.2% to open Tuesday’s trading.

Oil price drop shows no signs of slowing

Both Brent and US crude oil futures traded at over five-year lows on Tuesday, reported The Wall Street Journal. Global oversupply is still the issue and analysts cannot be sure when – and at what level – prices will settle. Brent crude for February delivery declined 1.2% to roughly $52 per barrel, the lowest mark since April 2009. Meanwhile, light, sweet crude on the New York Mercantile Exchange dropped almost a full dollar to nearly $49 per barrel.

Investors are panicking and some believe prices could fall a good deal lower before any stability takes hold. One analyst said a $40 per barrel level is well within reach, while some have even purchased options for $20 per barrel.

While such an extreme low is still unlikely, it is nevertheless uncertain where the bottom lies. Saudi Arabian oil producers have maintained output, while US shale oil production is still strong. Until these factors and others figure out a balance, oversupply will continue to dictate pricing.

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