S&P 500 and Nasdaq Rebound, Crude Oil Drops 5%

Barry Adams
08 Jan, 2024
New York City

Stocks advanced in Monday's trading after closing down in the first week of trading in 2024.

The S&P 500 index and the Nasdaq Composite rebounded from the morning doldrums, and investors debated future rate paths ahead of the release of inflation data later in the week.

Market sentiment turned positive after crude oil prices plunged by as much as 5% following Saudi Arabia's price-cut announcement.

Saudi Arabia lowered the benchmark premium to between $1.50 and $2.0 a barrel for February crude oil delivery in Asia.

Moreover, OPEC also increased its daily production in December by 70,000 barrels per day to 27.88 million bpd, according to a report by Reuters.

Meanwhile, the number of U.S. oil drilling rigs increased to 501 last week, indicating rising oil supplies in global markets.

The lower oil price raised the prospect of further weakening inflation, supporting the case for policymakers to cut the interest rate in March.

Market sentiment wavered last week after the hotter-than-expected nonfarm payrolls report and the hawkish tone of the minutes of the Fed's meeting in December dampened the prospect of a rate cut in March.

Banks are scheduled to kickstart the earnings season this week, and Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo are expected to release their quarterly results.

United Health, Delta, Black Rock, and Delta Air Lines are also among the leading companies scheduled to release their results.

Fiscal year budgets and government spending were also in focus as Congressional leaders announced a deal on Sunday to keep total spending at $1.59 trillion and avert a government shutdown later in the month.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.07% to 4,736.25, and the Nasdaq Composite increased 0.2% to 14,633.52.

The yield on 2-year Treasury notes decreased to 4.39%, 10-year Treasury notes held steady at 4.04%, and 30-year Treasury bonds rose to 4.20%.

Crude oil prices declined in Monday's trading after Saudi Arabia said it plans to cut oil prices in February for deliveries in all regions amid softening demand and rising global oil supplies.

WTI crude oil decreased $3.54 to $70.25 a barrel, and natural gas prices decreased 6 cents to $2.82 a thermal unit.

Gold decreased $14.10 to $2,031.42 an ounce and extended losses from the last week as investors cooled rate-cut hopes and awaited the release of inflation data later in the week.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.42.

 

U.S. Stock Movers

Boeing Company declined 6.3% to $233.03 after the Federal Aviation Authority temporarily grounded 737 Max 9 aircraft for an emergency safety inspection.

The FAA ordered the grounding after a plug door unlocked and fell off midair during an Alaska Air flight on Friday after takeoff from Portland, Oregon, heading to Ontario, California.

Of the 171 aircraft grounded by the FAA, Alaska Airlines has 65 planes, United Airlines has 79, and the rest are with six international airlines, including the discount airline Lion Air.

The aircraft maker has been struggling with pandemic-era supply chain disruptions and two plane crashes in Ethiopia and Indonesia in 2018 and 2019. that killed 346 people.

The fuselage maker, Spirit AeroSystems, plunged 13.5% to $27.43 after the panel incident.

Lululemon Athletica declined 1.4% to $484.50 despite the specialty apparel retailer lifting its outlook.

The company lifted its fourth quarter earnings estimate range to between $4.95 and $5.0 from the previous estimate between $4.85 and $4.93.

 

European Markets Erase Morning Losses 

European markets struggled to advance amid rising tensions in the Middle East, and investors digested a fresh batch of economic news.

Benchmark indexes remained under pressure after Israel stepped up its bombing campaigns targeting sites controlled by Hamas and Hezbollah in Khan Yunis and Lebanon in overnight strikes.

Investors welcomed the increase in Germany's trade surplus and the rebound in factory orders in November, but annual inflation in Switzerland accelerated in December.

German factory orders increased by 0.3% from the previous month in November. The increase in domestic orders overwhelmed the decline in foreign orders, Destatis reported Monday.

Consumer price inflation in Switzerland increased to 1.7% in December from 1.4% in November, the Swiss Federal Statistics Office reported Monday.

On a monthly basis, consumer price inflation was unchanged after falling 0.2% in November.

 

Germany's Trade Surplus Nears a 3-year High

Germany's international trade surplus widened in November to €20.4 billion from the slightly revised €17.7 billion in October, the Federal Statistics, or Destatis, reported Monday.

The monthly trade surplus was the largest since January 2021, and exports rose 3.7% from the previous month to €131.2 billion and imports advanced 1.9% from the previous month to €110.8 billion.

Exports declined 5.0% and imports fell 12.2% on an annual basis.

Calendar and seasonally adjusted exports increased 5.4% from the previous month to €71.5 billion, exported to the member states of the European Union, and imports rose 2.8% to €58.9 billion.

Exports to the U.S. fell 1.4% to €13.4 billion, but to China, they advanced 3.1% to €8.1 billion, and to the UK, they increased 15.2% to €7.7 billion.

Imports from China rose 3.1% to €13.0 billion, from the U.S. advanced 3.0% to €8.1 billion, and from the U.K. jumped 6.3% to €2.9 billion.

 

Europe Indexes and Yields

The DAX index increased 0.7% to 16,716.47, the CAC-40 index rose 0.4% to 7,450.24, and the FTSE 100 index inched higher by 0.06% to 7,694.19.

The yield on 10-year German bonds held steady at 2.16%; French bonds were nearly unchanged at 2.70%; the UK gilts edged up to 3.79%; and Italian bonds advanced to 3.86%.

The euro edged lower to $1.093, the British pound inched lower to $1.269, and the U.S. dollar eased to 85.08 Swiss cents.

Brent crude declined $3.12 to $75.63 a barrel, and the Dutch TTF natural gas decreased by €3.06 to €31.49 per MWh.

 

Europe Stock Movers

Pandora increased 1.0% to DKK 956.60 after the Danish Jewelry Company reported that December quarter organic sales increased by 12% from a year ago.

Overall sales increased by 8%, surpassing the company's own forecast released in November of growth between 5% and 6%.

Revenue in the fourth quarter increased to DKK 10.8 billion, or $1.58 billion, from DKK 9.9 billion, while earnings before interest and tax rose to DKK 3.7 billion from DKK 3.2 billion.

Maersk declined 1% to DKK 13,765.0, and the company announced a significant rerouting of merchant shipments away from the Red Sea in response to the persistent threat posed by Yemen-based Houthi rebels.

Casino declined 4.5% to €0.58, and the European Commission approved the transfer of control of the French retail company to a consortium led by Daniel Kretinsky. 

Evotec advanced 0.5% to €18.03 after the German biotech company announced progress in product development through its strategic partnership with Bristol Myers Squibb.

Oil companies were in focus after crude oil prices declined more than 1% after Saudi Arabia announced a sharp cut in oil prices and a rise in OPEC oil output.

Shell PLC decreased 1.9% to 2,523.0 pence after the company announced asset impairment charges between $2.5 billion and $4.5 billion, primarily linked to the assets in Singapore.

Plus500 increased 5.2% to 1,747.0 pence after the company reported annual results ahead of market expectations.

Revenue in 2023 increased to $725 million, operating earnings were $340 million, and the cash balance rose to $900 million.

The company said it will publish its preliminary results on February 12.

 

Indexes In China Decline; Japan, Korea, and Australia Advance

In Asia, market indexes declined in mainland China by 1% and in Hong Kong by more than 2.4% after tech stocks led the decliners.

Economists estimated that official reports on January 12 are likely to show China's export and import growth slowed in December and inflation declined 0.4% after falling 0.5% in November, indicating persistent deflation.

Investors' hope of the Chinese government providing economic stimulus has so far not materialized, keeping the market index in a downward spiral for the fifth year in a row.

Market indexes in Korea and Japan advanced 0.3% ahead of the Bank of Korea's monetary policy announcement later in the week, and market indexes in Australia advanced 0.1% in choppy trading.