Fundamental Analysis

Oil Stocks Pull S&P 500, Dow Lower As Virus Fears Weigh

The S&P and the Dow indexes retreated from record highs on Monday as energy and other sectors sensitive to economic growth tumbled on concerns over rising COVID-19 cases.

Energy (.SPSY), down 0.7%, bore the brunt of selling, tracking a slump in crude prices as an increase in coronavirus cases, particularly in China, raised fears of new curbs that could hurt oil demand.

Nine of the 11 major S&P sectors declined in early trading. Defensive sectors such as consumer staples (.SPLRCS) and healthcare (.SPXHC) were the sole gainers on Monday.

Metal miners also came under pressure from steep declines in copper and gold prices on concerns over Chinese demand. Freeport-Mcmoran Inc (FCX.N), the world’s largest publicly traded copper producer, fell around 1.7%.

In the United States COVID-19 infections rose by at least 22,783 on Sunday to 35.94 million total cases, according to a Reuters tally.

“The overriding trepidation is still coming from Delta (variant) and the market is just being little bit cautious here despite the strong jobs report,” said Thomas Hayes, managing member at Great Hill Capital in New York.

Investors awaited fresh catalysts to push the market higher, after strong jobs data saw the S&P 500 (.SPX) and the Dow Jones (.DJI) end last week at record highs.

A meeting of Federal Reserve leaders in Jackson Hole, Wyoming, later this month, is also expected to shed more light on the central bank’s potential plan to trim its stimulus program, in the wake of rising inflation and strength in the job market.

“The market is probably looking toward Jackson Hole to whether or not the Fed is going to change their tune, and possibly talk about taper earlier rather than later,” said Hayes.

Focus was also on the passing of a $1 trillion bipartisan U.S. infrastructure bill with a vote possible by Tuesday, after details of the bill gained support in the Senate over the weekend.

At 9:54 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 116.15 points, or 0.33%, at 35,092.36, the S&P 500 (.SPX) was down 7.01 points, or 0.16%, at 4,429.51, and the Nasdaq Composite (.IXIC) was up 8.48 points, or 0.06%, at 14,844.25.

A stellar earnings season has seen U.S. stocks surge to record highs over the past two weeks, as several consensus-beating results from major firms reinforced faith in a post-COVID economic recovery this year.

Analysts expect second-quarter profit growth of 92.9% for S&P 500 companies, according to IBES data from Refinitiv. Of the 427 companies in the index that have reported earnings so far, 87.6% beat analyst expectations, the highest on record.

Sanderson Farms Inc (SAFM.O) gained 7% after it agreed to be bought for $4.53 billion by commodities trader Cargill Inc and investment firm Continental Grain Co at a time when meat prices have been soaring due to strong demand.

American National Group Inc (ANAT.O) jumped 7.9% after Brookfield Asset Management Inc’s (BAMa.TO) reinsurance unit agreed to buy the U.S. insurer for about $5.1 billion.

Declining issues outnumbered advancers for a 1.95-to-1 ratio on the NYSE and a 1.40-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and 1 new low, while the Nasdaq recorded 43 new highs and 33 new lows.

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Vladimir Ribakov

Following 11+ years of trading experience, trading my own accounts as well as for hedge funds and brokerages, I have decided to fulfill my destiny and to personally mentor Forex and Commodities traders. When I released the “Broker Nightmare” (software that hides trades from brokers) 8 years ago, I found an overwhelming number of frustrated people who genuinely wanted to learn how to trade the Forex market, but instead found themselves scammed and misled. Over the years I have also release other trading systems based on my trading strategies, and met a lot of people on my worldwide Forex seminars. We’ve formed a close Forex community and we meet once or twice a year in various locations in Europe.

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