Stocks were relatively quiet as declines in small-cap and energy shares offset stronger than expected earnings. Oil fell to the lowest level in four years on signs that OPEC will not cut production.
Oil is again “testing” the psychologically important $75 area. I must write during the past 30 days oil has traded between $76 and $81. The majority of this $30 decline from $105/barrel occurred prior to October 15. The point that I am attempting to make typically whenever a narrative becomes myopic, the majority of the move has already been made.
I am not suggesting oil will rally in the immediate future but rather stating the majority of the damage may have already been done and to now perhaps expect the unexpected.
It is generally regarded oil under $75 will severely impact the vast majority of those countries whose economy is primary oil exports. If oil remains at current levels, will greater civil unrest occur in areas of the world, areas of the world which are at best volatile?
The OPEC meeting is November 27. Will the outcome of this meeting change sentiment?
Speaking of oil, retail sales are announced today. As written several times, the current drop in oil has transferred about 1.5% of global GDP from the oil producers to the oil consumer. The US is the largest economy by the factor of three. The US is also the largest consumer of oil. Consumer sales are 70% of the economy.
Will sales surprise on the upside before this pivotal holiday shopping season? Sales are expected to rise by 0.2% and up 0.4% ex autos and gas.
Last night the foreign markets were mixed. London was down 0.30%, Paris down 0.24% and Frankfurt down 0,43%. Japan was up 0.56% and Hang Sang up 0.28%.
The Dow should open quiet ahead of retail sales and confidence data. The 10-year is of 3/32 to yield 2.35%.