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Can Stocks Snap Skid as Crude Oil Stabilizes Near $37?

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December 10, 2015

U.S. stocks could tally their first advance in four days Thursday if early indicators hold up. Oil and metals trading volatility continues to ripple through stocks, evident in Wednesday’s big swings. Gains today would mark a U.S. divergence from weaker trading in Asia and in Europe; broad European stock averages slid to a seven-week low.

Crude oil futures twitched between gains and losses, but the U.S.-traded contract is just above $37 a barrel.

As for economic data, a report showed new applications for U.S. unemployment benefits jumped by 13,000 to 282,000 in the week ended Dec. 5—the highest level in five months. The less-volatile four-week average of new claims, meanwhile, edged up by 1,500 to a seasonally adjusted 270,750, the Labor Department said Thursday. While the report tips bearish, it had little impact in shifting Fed funds futures markets. They still indicate expectations for a December Fed rate hike.

SPX stock chart

FIGURE 1: NEW TESTS?

The S&P 500 (SPX), charted on the thinkorswim® platform, churns deeper below the psychologically significant 2100 line, so far this week reflecting the tug of weaker energy and materials shares. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

More From OPEC. Oil prices were in focus again on Thursday, as the Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report that oil production rose by 230,000 barrels a day in November to 31.70 million barrels a day. It’s a move that Street analysts said reaffirms OPEC plans to further protect its market share. The organization also cut 2016 estimates for non-OPEC output by 250,000 barrels a day to average 57.14 million barrels a day, saying it expects the weak prices to take its toll on U.S. oil production in coming months. Last week, OPEC decided to raise its production ceiling to 31.5 million barrels of oil a day.

More Details from Yum Brands. Yum Brands (YUM) says it plans to return $6.2 billion to shareholders before the separation of Chinese operations, expected to be complete by the end of 2016. It also shed some light on the consumer climate in China. YUM says November same-store sales declined 3% year-over-year in its China division, including 9% at Pizza Hut Casual Dining. Yum is reiterating its Q4 China division same-store sales guidance of flat to 4% with positive same-store sales growth at KFC and a decline at Pizza Hut. The company also confirmed its full-year 2015 outlook for flat to low-single-digit earnings per share growth.

FSLR: Not so Bright? S&P 500-listed First Solar (FSLR) fell sharply in pre-market trading after a late-Wednesday warning for sales. FSLR said it sees full-year fiscal 2016 earnings between $4 a share and $4.50 a share on sales between $3.9 billion and $4.1 billion. The company expects to spend $300 million to $400 million, higher than in 2015, on investments in "further advancements in its cost and technology roadmap," it said in a statement. Wall Street analysts had expected First Solar to earn $4.09 a share for 2016 on sales of $4.07 billion.

Good Trading,

JJ

@TDAJJKinahan

Economic report calendar

FIGURE 2: ECONOMIC AGENDA.

This week’s U.S. economic report calendar. Source: Briefing.com.

Join Us to Figure Out the Fed

TD Ameritrade’s JJ Kinahan and Craig Laffman will huddle pre-Fed decision on Wednesday, December 16, at 9 a.m. Eastern. They’ll discuss the potential impact of rising rates. 

JJ Kinahan

JJ began his career in 1985 as a Chicago Board Options Exchange...

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