From Barron's Stocks to Watch, the first of what will be a few posts on what happened today:
Sum of All Fears: Dow Drops 295 Points as Oil, Recession Fears Weigh
Stocks tumbled today as oil closed below $30 a barrel and corporate leaders started mentioning the dreaded “R-Word”–recession.And from CNN:
The S&P 500 fell 1.9% to 1,903.03 today, while the Dow Jones Industrial Average dropped 295.64 points, or 1.8% to 16,153.54. The Nasdaq Composite tumbled 2.2% to 4,516.95.
Oil dropped 5.5% to$29.88 today, and that was a big part of the problem for stocks today. BofA Merrill Lynch technical strategist Paul Ciana contends that oil is trying to stabilize:
In our view, crude oil’s bear trend remains though we see reason to believe it may remain in the high $20s to low $30s for the next few weeks. The bullish momentum divergence reported on January 12 opened a parachute for price, suggesting the high-speed fall was running out of momentum. In addition, crude oil is entering its strongest seasonal period. February and March remained strong months for the past five, 10 and 30 years on average, despite volatile swings. Prices tend to peak in April. Also, the daily high to low percent distance is reaching levels similar to August 2015 where the market temporarily stabilized. And, crude oil finished January above $30/bbl, which technically shows a little strength is emerging in price.Oil wasn’t the only problem, however, as references to recessions when companies reported earnings have increased. Reuters’ David Randall notes that 92 companies have mentioned recessions this earnings season, a 33% increase from a year ago. John Canally, Chief Economic Strategist for LPL Financial, agrees: The risk of a recession has risen this year:
In recent weeks, there have been plenty of “groundhogs” in the financial markets and in the financial media. For some investors, the fear is that the market’s performance in January 2016 will be repeated over and over again, as in the classic 1993 film Groundhog Day starring Bill Murray and Andie MacDowell. Other investors fear that 1998 will play out all over again, triggered by central bankers’ policy mistakes, volatile currency markets, wave after wave of currency devaluations, and eventually a sovereign default....MORE