Stocks off session lows as oil struggles for gains; Netflix, Amazon weigh

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U.S. stocks traded lower Wednesday as low oil prices and consumer discretionary stocks weighed.

Brent (@LCO.1) and WTI (@CL.1) crude oil futures struggled for gains after weekly U.S. crude inventory data showed a build of 234,000 barrels and a rise of 8.4 million barrels of gasoline, according to Dow Jones.

Energy tried to hold slightly higher after initially giving up opening gains as oil turned lower. Consumer discretionary was the greatest decliner in the S&P 500. The Dow transports traded more than 1 percent lower in mid-morning trade.

“It’s all about oil. (China) trade data negative but still better than expected. That’s a relief for the market in general,” said Peter Cardillo, chief market economist at First Standard Financial

Earlier, oil traded more than 3 percent higher, above $31.50 a barrel. WTI briefly fell below the psychologically key $30 level Tuesday, hitting a fresh 12-year low.

The Nasdaq composite underperformed as Amazon (AMZN) fell more than 2 percent and the iShares Nasdaq Biotechnology ETF (IBB) (IBB) traded more than 1 percent lower. Apple (AAPL) clung to slight gains.

Netflix fell 5 percent in morning trade to also weigh on the Nasdaq. Netflix and Amazon both more than doubled in 2015 as the top performers in the S&P 500.

“I think it’s just wait and see now until the bank earnings come in,” said Marc Chaikin, CEO of Chaikin Analytics.

“The mood is pretty sour on Wall Street. I think people are using rallies as opportunities to raise cash,” he said, noting resistance in the S&P 500 at 1,950.

JPMorgan Chase earnings are expected Thursday before the opening bell.

Stocks opened higher Wednesday, helped by recovery in oil prices and Chinese data overnight.

“Definitely the rebound in crude (was supporting gains),” said Jeremy Klein, chief market strategist at FBN Securities. “The Chinese trade data, that kept us from going lower.”

China’s crude oil imports hit a record high in December, while copper imports were the second highest on record, according to customs data.

Overall Chinese exports and imports fell by less than expected in December, leaving a trade surplus of over $60 billion for the month, the data showed. The economy likely had its weakest annual growth in 25 years. China GDP data is expected next week.

“Just more stability coming out of the Far East. Some stability coming into the yuan,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

“We had a rebound yesterday that was decent. Some of the market internals weren’t strong,” Luschini said. “The question will be, can it carry through today?”

The Chinese yuan held steady for a fourth-straight day, with the People’s Bank of China setting the yuan midpoint fix against the U.S. dollar at 6.5630, compared to yesterday’s fix of 6.5628.

Devaluation in the yuan against the dollar last week and speculation of significant weakening in the currency weighed heavily on U.S. stocks last week.

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The Shanghai composite stock index (.SSEC) erased early gains to close 2.4 percent lower, while Asian markets mostly closed higher on Wednesday.

European stocks pared gains to trade mixed in morning U.S. trade.

The iShares MSCI Emerging Markets ETF (EEM) (EEM) held more than half a percent higher in mid-morning trade.

At 2 p.m. ET, the Federal Reserve’s Beige Book and the monthly budget will be released and may shed some light on the state of the economy and when the next interest rate hike may come.

In a Wednesday speech, Boston Fed President Eric Rosengren said global and U.S. economic growth may be slipping and force the Federal Reserve into a more gradual course of rate hikes than officials currently expect.

“While monetary policy should not overreact to short-term temporary fluctuations in financial markets, policy makers should take seriously the potential downside risk to their economic forecasts and manage those risks as we think about the appropriate path,” Rosengren said.

Mortgage application volume increased 21.3 percent last week versus the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association.

Treasury yields held near Tuesday’s levels, with the 2-year yield (US2Y) at 0.92 percent and the 10-year yield (US10Y) at 2.11 percent in morning trade.

The Treasury is scheduled to hold a $21 billion auction in benchmark 10-year notes (US10Y) this afternoon.

The U.S. dollar traded a touch higher against major world currencies, with the euro near $1.085 and the yen at 118.19 yen against the greenback.

Copper edged higher after hitting fresh near-seven-year lows earlier in the week. Freeport-McMoRan extended the week’s sharp decline to trade more than 8 percent lower in mid-morning trade.

As of mid-morning trade Wednesday, the major U.S. averages were on pace for weekly gains of about half a percent or more, but were down 5 percent or more for the year so far.

U.S. stocks closed higher Tuesday, recovering most of their opening gains and shaking off intraday pressure from declines in oil.

In mid-morning trade, the Dow Jones industrial average (.DJI) declined 32 points, or 0.20 percent, to 16,483 with Home Depot (HD) the greatest decliner and Microsoft (MSFT) leading advancers.

The S&P 500 (.SPX) fell 4 points, or 0.19 percent, to 1,934, with consumer discretionary leading five sectors lower and telecommunications the greatest advancer.

The Nasdaq (.IXIC) composite declined 17 points, or 0.36 percent, to 4,669.

About three stocks declined for every two advancers on the New York Stock Exchange, with an exchange volume of 268 million and a composite volume of nearly 1.2 billion.

Crude oil futures for February delivery added 20 cents to $30.66 a barrel on the New York Mercantile Exchange. Gold futures rose $4.60 to $1,089.80 an ounce as of 10:58 a.m. ET.

Evelyn Cheng

Reuters contributed to this report.

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