New York is poised to open lower on weak global economic data and expectations of another hard session for oil stocks following Opec’s decision last week not to cut production to support crude prices.
Opec’s move last Thursday has led to oil prices tumbling. In the late morning today, Brent crude was down 0.7% to $69.68, having earlier in the day dropped to $67.53 – its lowest in almost five years. The FT notes the fall adds to the 12.7% slide seen last week, which came after Opec held its production ceiling at 30 million barrels a day despite a supply glut.
Jasper Lawler, market analyst at online trading firm CMC, sees the Dow opening 65 points lower at 2,057 with tech-heavy Nasdaq off nine points at 4,328.
Lawler believes the Opec decision will continue to haunt oil stocks in the near term. “Any rise in energy stocks today will purely be short-covering”, he says.
In pre-market open trade, the likes of Exxon, Chevron, Hess and ConocoPhilips were all suffering.
But while US oil stocks are suffering, transportation groups have been in demand as investors looked to price in the impact of much lower energy prices on their costs.
Nasdaq shares Spirit Airlines and Republic Airways, for instance, are hitting 52-week highs thanks to the lower oil prices.
Looking ahead, the big question is how far oil prices will fall. Murray Edwards, billionaire chairman of Canadian Natural Resources fears crude could slump to US$30/barrel before eventually stabilising to US$70-$75 a barrel.
Aside from the tumbling oil price, sentiment over US markets is being undermined today by overnight data showing a slowdown in China is gathering pace. Data out this morning showing the eurozone’s manufacturing expansion has ground to a halt further spooked investors.
On the companies front, US retailers will again be in sharp focus. Amazon yesterday revealed that it smashed through all sales forecasts for Black Friday, selling more than 5.5 million items were sold, averaging 64 sales every second.
CMC expects Amazon to continue sizzling today, dubbed ‘Cyber Monday’ – another annual sales bonanza, but focused mainly on online shopping. Wal-Mart, Best Buy and Target have all reported close to record online sales on Black Friday and also stand to benefit from a bumper Cyber Monday, says CMC.