Stocks open September mixed as oil prices drop

U.S. stocks closed mixed on Tuesday, with the large-cap indexes lower and small-cap and technology barometers higher to start September.

The Dow fell 0.2% and the S&P 500 lost a little less than half that, driven by a sharp drop in the price of oil stocks as the price of crude fell. But NASDAQ managed a 0.4% rise, led by internet stocks, which rose 1.3%, as both Facebook and Twitter rose over 2% each. The small-cap Russell 2000 index gained 0.4% while the S&P 600 rose 0.6%.

The 10 S&P sectors were evenly split between gainers and losers, with energy (-1.3%) and utilities (-1.0%) the biggest decliners. Among the 30 Dow stocks, losers beat winners by a much wider margin, 21 to 9, led lower by oil producers Chevron (-1.4%) and Exxon (-1.0%). Media reports blamed the nearly 3% drop in WTI oil Tuesday on the end of the U.S. summer driving season and expected weak global demand for oil in light of subpar economic growth in Europe and China.

U.S. Treasury bond prices were sharply lower on profit-taking following last week’s big gains, raising yields. The 10-year note fell 21/32 points in price, raising its yield seven basis points to 2.42%, basically wiping out all of last week’s gains. The rationale for the selloff was a couple of better-than-expected reports on the U.S. economy. The ISM’s manufacturing index rose to 59.0 in August, well above the 56.8 Street forecast and up from 57.1 in July. It was the highest reading for the index since March 2011. The new orders index rose more than three points to 66.7. Construction spending for July rebounded 1.8%, double the consensus estimate after falling a revised 0.9% in June, originally reported as a 1.8% drop.

European stocks were mostly higher Tuesday although off their peaks of the day. Germany’s DAX index closed with a 0.3% gain after having been up more than 1% earlier in the day. The broad-based Stoxx Europe 600 closed with a fractional loss after having been higher by 0.3% earlier. Sovereign bond prices were also lower on the continent. The yield on the 10-year benchmark German bund rose five basis points to 0.93%, its highest level in a week after dropping to a historic low of 0.88%. Italian and Spanish bonds were also lower in price. On Monday the Spanish government sold 1 billion euros of 50-year bonds in a private placement. The European Central Bank is scheduled to meet on Thursday; investors are expecting some kind of stimulus or asset-purchase announcement.

Asian shares finished mostly higher. Japan’s Nikkei 225 jumped 1.2% to its highest closing level since January as the yen dropped to 105 against the dollar, its lowest level since the beginning of the year. The Shanghai composite rose 1.4% to its highest close since June of 2013. India’s Sensex gained 0.6% while Hong Kong’s Hang Seng index ended unchanged.

Reports/dates/facts/links worth paying attention to over the next week:

  1. September 3: ADP national employment report.
  2. September 4: ISM non-manufacturing purchasing managers’ survey (August); weekly unemployment claims.
  3. September 5: Labor Department report on unemployment and payrolls (August).

Copyright © 2014 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

This entry was posted in Bonds, Energy, Purchasing Managers' Index. Bookmark the permalink.