por admin » Mar Oct 11, 2016 8:43 am
Stocks Cool as Oil Rally Fades
Oil prices ease as dollar strengthens
By RIVA GOLD
Updated Oct. 11, 2016 9:40 a.m. ET
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Stocks mostly cooled at the start of the U.S. earnings season on Tuesday as a rally in oil prices began to fade.
The Dow Jones Industrials opened trading down 70 points, or 0.4%, to 18258. The S&P 500 fell 0.4% and the Nasdaq Composite was down 0.3%.
Brent crude oil pulled back 0.9% to $52.69 a barrel following a report from the International Energy Agency suggesting global supplies rose in September. Oil prices had hit a one-year high in the previous session on news that Russia would support the Organization of the Petroleum Exporting Countries’ attempt to cut its collective output.
The U.S. earnings season also unofficially kicked off shortly before markets opened with results from Alcoa Inc., its final quarterly report as a single company. Shares of the aluminum giant fell over 7%after it missed on both the top and bottom line.
Shares of Illumina Inc. also fell over 26% after the DNA-sequencer cut its revenue guidance.
Companies in the S&P 500 are expected to report an earnings decline for the sixth consecutive quarter, according to analysts polled by FactSet.
Tuesday’s decline in commodity prices also came as the WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, rose 0.4%.
Russia said Monday it would support OPEC’s attempt to cut output. ENLARGE
Russia said Monday it would support OPEC’s attempt to cut output. PHOTO: GETTY IMAGES
Analysts attributed dollar’s strength to rising expectations for higher U.S. interest rates this year.
The Federal Reserve in September acknowledged a rate increase was likely before the end of the year, and recent comments from Fed officials and U.S. economic data have heightened investors’ expectations for a move in December.
Federal Reserve of Chicago President Charles Evans said Tuesday the U.S. economy is on a sound footing and that a December rate increase “could be fine.” The Fed will release the minutes from its September meeting on Wednesday.
Fed-fund futures, used by investors to bet on central-bank policy, showed investors currently price a more than 70% chance of higher rates by the end of the year, according to CME Group.
Analysts also attributed some of the dollar’s strength to investors’ perception that Donald Trump was falling behind in the U.S. presidential race after House Speaker Paul Ryan cut the cord to the Trump campaign on Monday.
“We think a December rate rise is pretty likely now,” said Mike Bell, strategist at J.P. Morgan Asset Management. The only things that could derail that are a significant negative reaction in markets to the U.S. election or a marked deterioration in U.S. economic data, both of which seem increasingly less likely now, he said.
The yield on the 10-year Treasury note rose to as high as 1.774%, around its highest since early June, as the U.S. bond market reopened from a holiday. The two-year Treasury note, which is highly sensitive to interest rate changes, rose to 0.874%.
Elsewhere, the Stoxx Europe 600 swung between small gains and losses and was last up 0.1%. The technology sector was the worst performer, after a steep fall in shares of Samsung Electronics Co. dragged down Korea’s Kospi index.
The electronics company’s stock fell over 8% after it halted distribution of its Galaxy Note 7 smartphone because of issues with batteries overheating and said Tuesday that it would permanently discontinue production and sales of its embattled smartphone.
In other currencies, the British pound fell 0.6% to $1.2284, bringing losses this year close to 17%. “The market is now assuming that the U.K. is going to go ahead with a hard Brexit, prioritizing control of immigration over access to the single market,” Mr. Bell said.
London’s FTSE 100 index touched its highest level in at least 20 years in local currency terms on Tuesday as the falling currency lifted the export-heavy index.
The euro was down 0.6% against the dollar at $1.1079, even after data showed a pickup in German economic sentiment at the start of the fourth quarter. The dollar strengthened 0.1% against the yen to ¥103.7650.
Earlier, Japan led gains in Asian markets as a weaker yen boosted shares of exporters, helping lift the Nikkei Stock Average up 1%.
Shares in Shanghai added 0.6%, while Hong Kong’s Hang Seng Index fell 1.3% amid a steep fall in property stocks.
—Kenan Machado and James Glynn contributed to this article.