U.S. stocks turned slightly higher today after rising nearly 10% in one of its best weekly performances in years, today's sliding crude oil prices gives nearly the whole thing back in just today's session, now off 5% to the low $47's per barrel.
U.S. stocks close in the green and in the resistance zone, but also near flat as investors remained nervous about third-quarter corporate results.
Todays S&P 500 Chart
Not at all unexpected, traders are ignoring purportedly bullish news from OPEC, which revised its outlook for U.S. oil production next year to a decline from small gain. The group also sees lower production from Russia as leading declines in other non-OPEC producers.
Falling profits and increased borrowing at U.S. companies are rattling debt markets, a sign the six-year-long economic recovery could be under threat.
BOSTON (Reuters) - A rash of hacking attacks on U.S. companies over the past two years has prompted insurers to massively increase cyber premiums for some companies, leaving firms that are perceived to be a high risk scrambling for cover.
WASHINGTON (Reuters) - The U.S. Justice Department has raised concern about demands by U.S. airlines that the government limit flights of three Middle Eastern rivals to the United States, three sources familiar with the matter have said.
(Reuters) - Kohl's Corp said on Monday it will offer same-day delivery services in six more U.S. cities, taking a leaf out of Macy's Inc's book, as department stores aim to make online shopping more appealing ahead of the holiday season.
One year ago, when oil prices first cracked and tumbled from $100 to a level some 60% lower, it took the US oil industry about 9 months to fully feel the pain and proceed with cash-saving production cuts as a result of extensive oil-price hedges that had been put on at the historical price, cushioning the blow from the price collapse driven by a drop in global oil demand coupled with a surge in Saudi oil production. The impact of these hedges was largely muted by the summer of 2015 when we first saw a notable decline in US oil production which had recently hit record levels.
And with oil volatility surging in recent months, oil producers needed to take advantage of a rally, technical or otherwise, and an oil vol lull to reestablish hedges, even if it meant at far lower prices than recent benchmarks.
This is precisely what happened in the past week following one of the most torrid surges in the price of oil seen in recent years.
So ahead of looming re-determinations, crude oil producers which piled into this decidely technical-driven rally to hedge aggressively in order to show a more stable asset base for creditors, but more importantly, to offload further price decline risks to their counterparties. Today's reversal off $50 along with a surge in oil volatility suggests hedging activity has been aggressive, as further confirmed by Reuters..
And as a result of a new bevy of hedges put on around $50/barrell which coupled with the recent decline in the oil VIX leading to slightly cheaper hedges, firms can once again continue to produce at even lower prices as they have rebased their hedges thereby buying themselves a few more months of production at even lower prices - offsetting Saudi record production pressures. The biggest loser in this US hedging effort - the dwindling Saudi budget. The biggest winners: oil majors and other companies who rolled hedges for another 6-9-12 months, allowing crank up the producti ...
Since the mid-July peak, when Jim Cramer warned the market's "last shred of hope was the freight index holding up," The Baltic Dry Index has been in free fall (at a time with very positive technicals). In fact, today's drop to 809 is the lowest in over 3 months and the lowest for this time of year since 1986!!
Even as stocks have soared in the last 10 days, The Baltic Dry shows no signs of a pick up in freight traffic demand, instead quite the opposite.
Many portfolio managers have spent hours backtesting numerous variables looking for the holy grail of capital markets. Theoretically, profit margins should be the ultimate driver of returns. Indeed, they are. However, which direction the profits are driving the stock price is another matter.
Zero Hedge recently featured a study by Convergex' Nick Colas that showed how the most unprofitable biotech companies had the highest returns.
This got me to wondering if biotech was a special situation or if this kind of backwards capitalism applied elsewhere. Unfortunately, it applies to the entire market. Rather than rewarding companies with the highest profit margins and punishing companies with the lowest margins, the capital markets do the opposite: stocks of successful companies underperform, and stocks of losing companies surge. If you bought the 100 companies in the S&P 500 with the highest profit margins and shorted the 100 companies with the lowest profit margins, you would have lost half your capital in the last 15 years.
Market strategists are split in their opinion of the recent rally in the S&P 500â€™s weakest sectors of the year: While some think it is the bull market gathering its second wind, others see it as an unsustainable bear rally.
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