It seems the honeymoon might already be over. On Monday 09/22/08, stocks fell on concerns that the government plan to bailout financial companies, by buying up the bad mortgages and other assets weighing down their balance sheet, will not halt the downward spiral towards a worsening economy.

The plan which is estimated to cost at least $700 billion dollars caused the dollar to fall against major currencies. If implemented, the plan will drastically increase the liabilities of the U.S. government and that raises concerns amongst those who buy U.S. government bonds.

As a result, foreign investors are now worrying about whether the U.S. is the safest place for them to put their money.

With the drop in the dollar and the fact that Monday was an expiration day for oil futures, oil for November delivery, surged $16, closing at $109.37 on the futures markets. It was only last week that equity investors were celebrating oil falling below $95. This was the largest one day gain in oil prices and oil for October delivery which was expiring at the end of trading on Monday, actually spiked up $25.45 to $130 per barrel but then settled at $120.92, up $16.

The broad based decline in stocks caused steep losses across all the major indices, with the Dow Jones Industrial Averages losing 372.75 points (3.27%) to close at 11,015.69, Nasdaq lost 94.92 points (4.17%) to close at 2,178.98 while the S&P 500 index lost 47.99 points (3.82%) to close at 1,207.09.

 Tags: Stock Market  Dow Jones  Nasdaq  S&P 500

Seeking to stem the recent rapid decline in oil prices, OPEC ministers meeting in Vienna, reached an agreement overnight, to produce 28.8 million barrels of oil a day a day. This represents a shortfall of about 520,000 barrels a day from current production level. As a result, oil prices are rebounding, climbing a dollar to the $104 level in electronic trading.

The Energy Department will be releasing Crude Oil Inventories at 10:35 AM today, and being that this week’s report will reflect the effects of the hurricane Gustav related safety shutdowns, we may see a shortfall that may be bullish for oil, causing a further rise in oil prices.

Tags: OPEC  Oil Prices

At 10:35 AM today, we will be getting the Crude Oil Inventories numbers for the week ending 09/06/08. This will be the first report to reflect the effects of hurricane Gustav and depending on whether or not Wall Street wants to discount this special circumstance, we could see a spike in oil prices. Should oil prices rally, we might see further declines in stocks.

Coincidentally, FEDEX (FDX) after the close of market on Tuesday, upped its earnings guidance for Q1 2009 as a result of falling oil prices and the stock surged over four points in after hours trading.

Lehman Brothers (LEH) will also be front and center as it will be releasing what it terms “Key Strategic Initiatives” and its Q3 2008 results, which it is releasing a week early, at 7:30 AM today. Since Lehman (LEH) is currenty on life support, this news will be dictating direction for the markets today and depending on whether Wall Street deems the key strategic initiatives good enough to help keep Lehman afloat or not, we could see financials stage a rally, taking the rest of the market along for the ride, or further declines for the markets.

Tags: FEDEX  Lehman  OPEC

In this bear market when stocks should be falling, as they tend to do in a bear market, it seems Wall Street has been looking for any reason to move stocks higher. As a result, we’ve had quite a few impressive bear market rallies.

We recently saw stocks surge on a strengthening of the dollar, which has been rallying because Eurozone economies are now seen as weakening. The implications or more accurately, the interpretation of that data by Wall Street is that the Eurozone is weakening after the U.S., so the U.S. will come out of its economic malaise ahead of the Eurozone. Secondly, even though the reality is that the U.S. economy is also hurting, with the Eurozone “now” weakening, those who would be inclined to invest in European stock markets, might now look towards the U.S.

With a tendency to adopt a view like that Wall Street just got handed an incredible gift overnight, from the United Kingdom. The Office for National Statistics in the United Kingdom, said sequential economic growth for the second quarter was unchanged from the first. This was against a forecast of a growth of .02%

The lack of growth in the UK economy in the second quarter abruptly puts a stop to sixteen years of sequential quarterly growth. In the period, manufacturing in the UK fell by 0.8%, while services grew just 0.2% and household spending fell by 0.1%. As a whole, the economy grew 1.4% from Q2 2007, against a forecasted growth of 1.6%.

This should cause the dollar to rise against the British Pound and we could then see a further weakening of the Euro against the dollar as well. Should the dollar rally strongly, we will see a drop in crude oil prices, which in the absence of any major negative economic news, will then lead to a rise in equities. Considering the state of our economy and the worries over major financial companies, will a rise in stocks be warranted? Should we get such a rally, remember the mantra to buy the dips and sell the rallies.

tags: us contagion  oil prices  dollar

Oil prices are rallying this morning, following yesterday’s gains, on concerns that Russia might extend its Georgia military campaign and that tropical storm Fay might still pose a risk to oil production in the Gulf of Mexico.

Crude oil for September delivery is up $3.82, to $119.38. On the other hand, stocks are down at the open, with the Dow Jones Industrial Average now at 11,349.10 losing 78.33 points on continued concerns over Lehman Brothers (LEH) Fannie Mae (FNM) and Freddie Mac (FRE).

The other major indices are down as well, with the Nasdaq down 14.29 and trading at 2374.79
and the S&P 500 down 6.79 and trading at 1267.75.

At 10:35 am today (08/20/08), we will be getting weekly Crude Inventories report from the Energy Department. If we get a reading that shows gasoline stocks dropped more than is being forecasted, a rise in crude oil inventories is expected, we will see a continued rebound in the price of oil, which will send oil related stocks higher.

During regular trading on Tuesday, the price of oil for September delivery gained $1.66 to close at $114.53 a barrel. Crude prices did hit an intraday low of $111.64 a barrel after it was determined that tropical storm Fay won’t have any impact on oil production in the Gulf region. The intraday high was $116.65 a barrel.

We’ve been advocating on this blog for the past couple weeks now, that oil prices can’t keep going down in a straight line and that we were due for a near-term bounce. Of course, after we said that, oil prices decided to test out theory and just about succeeded.

The Crude Inventories will be released at 10:35am. So traders willing to put up some risk capital, have plenty time to place trades ahead of the report. We expect the report to be bullish for oil and as a result, yesterday, we issued an alert to subscribers of our Options Capitalist service, to buy the September 60 calls on Anadarko Petroleum (APC).

The current price is $2.20 on the ask side. This is still a good entry point. If entering the trade, buy at least 6-10 contracts, that’s the minimum, so that you can exit with a profit on even the slightest move in the stock.

Tags: oil prices, crude inventories, anadarko

Oil prices are rallying on the Crude Inventories report from the Energy Department for the week ending 08/09. The report which was just released at 10:35 AM EST, showed that crude inventories dropped by 316,00 barrels. Forecasters were expecting an increase of 300,000 barrels.

Prior to the report’s release, oil prices were in positive territory, but only up about $.50 cents. They have since shot up and are now up $2.16. The Dow Jones Industrial Averages added to their losses on the rising oil prices and are now off about 160 points.

oil prices

The only major economic reports we will be getting today are Crude Inventories due out at 10:35 AM, and Consumer Credit, due out at 3:00 PM. While the calendar is relatively light, we still have the potential for it to move the markets substantially.

With stocks having rallied strongly yesterday, with all major indices rising at least 2.8%, under the right conditions, we could see a strong follow-through today and the Crude Inventories could provide the impetus for that.

If the Crude Inventories report, which is being released by the  U.S. Energy Department’s Energy Information Administration is bearish, we will see a continued drop in oil prices, which could propel stocks higher. On the other hand, a bullish report would send crude prices surging, sending stocks lower.

Tags: oil prices, economic calendar, crude inventories report

Crude oil prices continue their downward trend, trading off about $3 in today’s action. The dollar rising in forex markets is proving a strong impetus for the drop in oil prices, as well as weakening demand for gasoline, as the higher prices force consumers to buy less gas. The drop in oil prices is boosting stocks up rather nicely.

Mastercard, which has a keen insight into how much holders of its credit cards are spending at the gas station, puts out a weekly survey of gasoline spending and those numbers show that gasoline consumption has dropped for thirteen straight weeks.

Oil is off almost 2 1/2% on the day, and down 17% from the record price of $147.27 that was reached on May 6th. Amazingly, Royal Dutch Shell today announced that is it suspending shipments of its Nigerian Bonny Light Crude, which is highly desired by refiners for its low sulphur content, until September, because rebel attacks on their pipelines have cause substantial damage. This however, is not having a negative effect on oil prices, although the price of oil was up initially, when the news was announced.

oil pricescrude oilroyal dutch shell