Benchmarks closed in the negative territory on Monday after oil prices soar due to attack on Saudi oil production facilities. Weak industrialproduction data from China Further dampened sentiments.
The Dow Jones Industrial Average (DJI) fell 0.5% or 142.7 points to close at 27,076.82. The S&P 500 dropped 9.43 points or 0.3% to close at 2,997.96. The Nasdaq Composite Index closed at 8,153.54, declining 0.3% or 23.17 points. The fear-gauge CBOE Volatility Index (VIX) increased 6.3% to close at 14.67. Advancers outnumbered decliners on the NYSE by a 1.09-to-1 ratio. On Nasdaq, a 1.18-to-1 ratio favored advancing issues.
How Did the Benchmarks Perform?
The Dow shed 0.5% ending an eight-day winning streak. In fact, the Dow closed on Monday around 1% below its record all-time closing high of 27,359.16, which it hit on Jul 15. The S&P 500 energy sector has been one of the worst performing sectors this year, but it plumed 3.15%. The S&P 500 index recorded five new 52-week highs and one new low, while the Nasdaq recorded 41 new highs and 22 new lows.
Saudi Oil Plant Attack Spikes Oil Prices
On Sep 14, the Saudi Aramco, officially known as the Saudi Arabian Oil Companyand one of the largest oil suppliers of the world was attacked by drones hitting its two major oil production facilities. This attack on Saudi’s national petroleum and gas Company, removed almost 5% of the global oil supply.
Though, Saudi Aramco’s officials have reported that they will try to restore about one third of the country’s oil production, the oil prices still soared to record high. The West Texas Intermediate crude (WTI) settled at $62.90 a barrel on Monday, which is the biggest one-day percentage climb since September 2008.
While the global benchmark, Brent crude settled at $69.02 a barrel, its largest one-day percentage gain since at least 1988. The Energy Select Sector SPDR Fund (XLE) jumped 3.4% Shares of Apache Corporation APA, Marathon Oil Corporation MRO and Hess Corporation HES jumped to 16.9%, 11.6% and 11.2%, respectively, and were the leading gainers on the benchmark index. Apache Corp, Marathon Oil and Hess has a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
After the attack, President Donald Trump on Sep 16 authorized the release of oil from the Strategic Petroleum Reserve to counter the rise in oil prices. Tough, Houthi rebels claimed the responsibility of the attack; the US Secretary of State Mike Pompeo accused Iran for the act. Trump has also hinted that he might take military actions after Saudi Arabia completes investigation into the attack.
Attack on the biggest oil production facility in the world also affected shares of airlines and cruise line operators. Airlines companies like JetBlue Airways Corporation JBLU and United Airlines Holdings, Inc. UAL plunged 3.1% and 2.8%, respectively, while Carnival Corporation & Plc CCL, one of the largest cruise liners’ in the world saw its shares drop 3.2%.
China’s Industrial Production Decline to a 17 and Half Year Low
China has been trying to take steps to improve its market sentiments by exempting tariffs on U.S. goods but sentiments dampened again as China’s industrial production fell to a new low in more than 17 years. The Industrial output slowed to 4.4% in August, compared to 4.8% in July. This is the slowest registered pace of expansion since February 2002.
The U.S.- China trade war had already affected sales in the international market, but softening demand in the domestic market took a toll on Chinese factory owners. Topping it up, the retail sales also missed expectations, registering a growth of 7.5% compared to 7.6% in July. The hardest blow was faced by automobile sector as car sales tanked.
Stocks That Made Headline
SemGroup Shares Surge on Takeover Deal by Energy Transfer
SemGroup Corporation SEMG recently announced that it has entered into a $5.1-billion contract to be acquired by pipeline giant Energy Transfer ET. (Read More)
ExxonMobil Strikes Oil Offshore Guyana for the 14th Time
Exxon Mobil Corporation XOM recently made its 14th oil discovery off the coast of the South American nation Guyana. (Read More)
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