Equity prices began Monday with some zip, but the pressure caused by record-setting oil prices later in the session sent the DJIA (+41.36 +0.32% to 13028.16) and S&P 500 (+1.28 +0.09% to 1426.63) floundering, while the NASDAQ Composite (-12.76 -0.50% to 2516.09) closed the day underwater.
The Oil stocks ($XOI +1.0%) were strong, as expected on this day. The strongest sectors were Utilities (XLU) and Industrials (XLI), both up +1.1% on the session.
The Financials (XLF -0.95%) and Basic Materials (XLB -0.26%) led the
afternoon sell-off. In the financials, the Broker-Dealers ($XBD -1.3%)
were weakest. The Airlines ($XAL -3.0%) were pressured by the record
price for oil. That oil price also hurt the Chemicals stocks.
For the Cara 100 stocks, there were 16 that hit intra-day 52-week highs. At the close, the winners were MBT +5.6%; ORCL +3.5%; VIP +3.5%; and TM +3.3%. The losers were: SNDK -7.5%; NTES -6.2%; GRMN -5.3%; and BBBY -3.3%.
On the economics front, the Conference Board Leading Economic Indicators (LEI) for April met expectations, lifting +0.1%.
The Bank of Japan maintained its rate at 0.5% today.
On the earnings front, Lowe's (LOW) suffered a -18% drop in Q1 net income, and guided its 2008 outlook lower as the home improvement industry is suffering badly from the housing and energy crisis. Earlier this morning, Home Depot (HD) reported a -66% plunge in Q1 earnings due largely to a one-time charge, and the results were as anticipated.
Crude Oil ($WTIC) yesterday hit another all-time record close of 126.95, up +$0.91/bbl. There have been reported promised hikes in oil production by the Saudis, but these results take time. In the near term, prices are put under pressure by analysts who are concerned that the oil companies are not creating sufficient new refinery capacity, which is keeping their margins high at the same time these companies are building reserves in preparation for the anticipated drawdowns during the next economic expansion.
Then, of course, there are speculators who are taking into consideration the probabilities of increased military and rebel action in and near the oil producing countries. Inflation creates insufferable human conditions for many people, which leads to increased violence and continuation of wars.
These economic drivers are pushing down against the price of the US Dollar, making conditions difficult for central bankers to effectively control.
Yesterday there was a small gain of +0.30% in the trade-weighted $USD, closing at 73.04. The Euro dropped -0.57% to 1.5505; the Yen by -0.26% to 95.90; and the British Pound -0.47% to 1.9482. The Canadian Dollar lifted +0.86% to 100.82, spurred by higher oil and metals prices.
Treasury yields edged lower but not by much.
