Tuesday, a major bearish call on global commodities contributed to stocks being under pressure from pre-opening to the closing bell.
Oil made a valiant attempt to buck that trend rallying from a 3% decline to start the day to a loss of less than 1% at day’s end. While market averages recouped a third of their losses in the last 90 minutes, it was no doubt a distribution day with broad market averages losing 1% to 1½% accompanied by negative breadth of greater than 3 to 1 on both NYSE and NASDAQ.
Wednesday, Oil rallied sharply late morning after the DOE inventory report showed a another weekly decline in crude and surprisingly a decline in distillates, despite being 2 weeks past the end of the summer driving season. That rally, which had WTI +3% at one point didn’t last very long.
Instead, traders and investors in black gold were treated to a late summer roller coaster ride with oil trading in a 4% range at least twice by day’s end.
Stocks Battling to Hold Critical Support
Stocks followed the volatility in crude closely with little else to focus on in a trading session missing many participants to the Jewish Holiday. Market averages settled with marginal losses of less than 0.5% and while breadth was noticeably improved from Tuesday, decliners still led advancing issues by 4 to 3 on NASDAQ and 3 to 2 on NYSE.
Oil stocks were particularly weak, with oil service names lower by 1½% to 2% as it certainly felt like funds were “flushing out” the biggest losers in the sector with 5 trading days left in Q3.
Financials and Utilities showed the most signs of life with some support from investors shopping for yield, and likely playing defense as well.
With 5 trading days left in Q3, there is no doubt that defense is a growing theme among investors as the landscape for equity markets is littered with growing nodes of uncertainty each week.
The Early Line: Early trading in US Equity futures points toward a sharply lower opening for stock later this morning with S&Ps 12 to 15 handles lower and the DJIA looking at an early triple digit loss.
Monday we held a key support level of 1920 on the S&P 500. Today might be a more challenging test.