Us Stocks React To Oil Slide
US stocks opened higher on Tuesday, but oil’s price slide could limit progress.
Tuesday, January 6, 2015 - 00:00
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.
Capitalize on falling prices with Nadex
While many investors are panicking amid the oil slide, there is a way to benefit from persistently declining prices. Binary options through Nadex allow investors to take a position on where oil might be priced in the short term. If the estimate is correct, the trade is profitable. If not, the investor can only lose his or her initial collateral. With limited risk and short term expirations, binary contracts can be an ideal way to trade on any market.
This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.