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Stocks Wobbly as July Wraps with Notable Drops for Oil, Chinese Stocks

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July 31, 2015

A shaky U.S. stock session could be in the works on Friday, fueled in part by end-of-the-month position-squaring by large participants. Europe was on slippery footing, too, after the International Monetary Fund had harsh words about Greece’s qualification for a third bailout. China ended a down session to close the books on its worst monthly performance in years.

Crude oil futures are down another 1.9% early Friday, to below $48 a barrel for the U.S.-traded WTI contract. Crude is on track to log a 20% July tumble, the deepest monthly drop so far this year. Crude’s retreat this year took a bite out of the earnings reports from oil majors Chevron (CVX) and Exxon Mobil (XOM) today. Gold and the dollar slipped.

FIGURE 1: BACK ABOVE 2100.

The S&P 500 (SPX) bounced late week to push back above 2100. The SPX is wobbly in early action Friday. Bulls are likely to embrace a close for the week above 2100, a closely watched line. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

China: Worst July in 6 Years. China’s benchmark Shanghai Index lost over 1% Friday and 14% for July, wrapping up the worst monthly performance in some six years as a tug-of-war between speculative funds and the government’s buying led to wild sessions. Monday’s 8.5% single-day loss was the worst for a session in eight years. The index is now 29% off its mid-June peak and has sparked concerns for spillover effect in emerging markets. Asian currencies fell to multiyear lows this month, putting further upside pressure on the U.S. dollar.

From the Oil Patch. Exxon Mobil (XOM) said its Q2 earnings were halved from the year-earlier comparison. XOM, the U.S.’s largest oil company, earned $1 a share compared to $2.05 a year earlier. Revenue fell 33% to $74.11 billion. Profit in the exploration and production business, or upstream, plunged 74% to $2.03 billion, as its U.S. upstream segment swung to a loss. Rival Chevron (CVX), whose shares are off 16% over three months, fell in early Friday trading. The oil major said its Q2 EPS dropped to $0.30 per share from $2.98 a year earlier, impacted by charges and the some 50% decline in crude prices from a year earlier. Chevron's upstream business swung to a net loss of $2.22 billion from a profit of $5.26 billion, while profit at its downstream business increased to $2.96 billion from $721 million. Revenue fell to $36.83 billion from $55.58 billion.

Bookings Boost Expedia. S&P 500 (SPX) member Expedia (EXPE) is an early sharp gainer after its post-close earnings results surprised by beating Street expectations. Gross bookings jumped 20%, excluding the sale of its eLong stake; bookings jumped 28% on a constant currency basis. Bookings were helped by strength in its Expedia and Hotels.com brands. Revenue grew 11% to $1.66 billion, but would have been up 25% excluding currency fluctuations and eLong.

Good trading,
JJ
@TDAJJKinahan

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