The stock markets in the United States plummeted, which was primarily caused by the decline of crude oil prices below $50 a barrel today.
The increasing worry about the possibility that the market will continue to have an oversupply of oil over the next quarters has something to do with the decline of crude oil prices to its current level.
Many businesses and consumers are benefitting from lower oil prices, but the equities of energy companies are suffering. Bloomberg noted that energy companies in the S&P 500 recorded an aggregate decline of 4.3% in November alone and 10% for the fiscal 2014.
Jeff Sica, president and CEO of Circle Squared Alternative Investments, commented, “The declines in oil are representing something more ominous, which is a global economic slowdown. Investors have gone past the thought that this is good for the economy.”
On the other hand, Jeff Gundlach, CEO of Double Line is hoping that the price of crude oil will not drop to as low as $40 a barrel. According to him, if the oil prices drop to that level, the yield on ten-year Treasury note will become 1% and the geopolitical consequence will be “terrifying.”
Gundlach is also worried about the potential increase of interest rates, which could weaken the economy of the United States.
“As prospects for a Fed tightening have increased over the year, the Dollar has strengthened and the Treasury bond market has been declining in yields. It is almost as if the treasury market and the junk bond market are projecting that the Fed raising interest rates will cause a recession,” said Gundlach.
Investors’ concern regarding the possibility that Greece will exit the euro region also contributed in the downward trend of the global markets.
“Greece is creeping back into the headlines and it’s an issue for people to pay attention to. The market is very close to record highs and we haven’t had a correction since fall of 2011. There’s a lot of potential for a pullback when you’re at these levels,” said Randy Frederick of Charles Schwab
(Data as of 3:30 PM in New York)
- Dow Jones Industrial Average (DJIA) – 17,510.00 (-1.81%)
- S&P 500- 2,021.93 (-1.76%)
- NASDAQ- 4,656.26 (-1.49%)
- Russell 2000- 1,181.34 (-1.46%)
- EURO STOXX 50 Price EUR- 3,023.14 (-3.70%)
- FTSE 100 Index- 6,417.16 (-2.00%)
- Deutsche Borse AG German Stock Index DAX- 9,473.16 (-2.99%)
- Nikkei 225- 17,408.71 (-0.24%)
- Hong Kong Hang Seng Index- 23,721.32 (-0.57%)
- Shanghai Shenzhen CSI 300 Index- 3,641.54 (+3.05%)
The stock price of Caterpillar Inc. (CAT) dropped more than 5% to $86.70 per share during the late afternoon trading today. JP Morgan analysts Ann Duignan downgraded her rating for the stock to Neutral citing the reason that the company’s exposure in the energy and mining sectors is a headwind. Duignan’s price target for Caterpillar is $80 a share.
Boston Scientific Corporation (BSX) gained more than 4% to $13.78 per share after its stock was rated Overweight by JP Morgan. The firm also increased its price target for the stock to $17.50 per share.
The shares of Vascular Biogenics Ltd (VBLT) climbed more than 16% to $7.85 per share. The stock climbed as much as $9.49 from $4.65 per share over the past 52 weeks. The company is among the biggest gainers on NASDAQ today.