Having been battered yesterday, US stocks today are seen opening on a flat to mixed note, with investors expected to remain wary against a backdrop of falling oil prices.
Late-morning futures were indicating S&P 500 will open flat at 2,020, with the Dow Jones ahead seven points higher at 17,508, and Nasdaq three points lower at 4,157.
In yesterday’s session, US stocks suffered a brutal sell-off as oil and eurozone worries took their toll. The S&P 500 and Dow notched up their biggest drop in three months, giving up 37.62 points, or 1.8%, and 331.34, or 1.86%, respectively. The Nasdaq, meanwhile, shed 74 points, or 1.57%.
Among the various factors undermining sentiment, oil is beginning to dominate as investors becoming increasingly concerned that the slump in prices is not just due to a global supply glut. The fear is the continuing slump in prices is at least partly due to a slowing global economy.
Late morning Brent and US crude futures were trading at five-and-half-year lows, with US oil trading under $50/barrel. At one stage it dallied with the $49/barrel mark.
The widely expected shakeout of US shale-oil drillers, hurt by oil prices having fallen so far so fast, appears to be taking hold. According to data from oil services group Baker Hughes yesterday, the number of rigs drilling for oil in the US fell by 17 in the week to 2 January. The biggest losses continue to be in the shale-intensive Permian Basin, located in West Texas and New Mexico. For the second week in a row, drillers there cut five rigs, bringing the total down to 522, the lowest since April.
Uncertainty over the economic outlook for the eurozone, amid speculation Greece may soon exit the euro, is further spooking investors.
On the corporate front, Jasper Lawler, analyst at CMC Markets, expects AOL to open higher on the prospect of a tie-up with Verizon which could lead to an acquisition. Verizon are looking to expand online content including mobile video services.
Lawler reckons Facebook will also be in sharp focus on news it has bought a voice recognition start up ‘Wit.ai’ to add it its collection of acquisitions, including the $19bn purchase of WhatsApp. Facebook founder and chief executive Mark Zuckerberg and his team are looking to turn user’s actual speech into another source of data to be harvested and turned into more targeted ads to increase the likelihood of a click and revenue for Facebook.