Stocks close mixed as oil prices slump again
Stocks ended mixed Wednesday as oil prices failed to rebound from a sharp fall during the previous session.
The Dow lost 57 points and the S&P 500 fell 0.06 percent as energy stocks led decliners. The sector briefly erased losses after bullish supply data from the oil market was released. The Nasdaq outperformed, rising 0.74 percent as biotechnology stocks spiked.
“It just seems to be a fair amount of uncertainty as to where the bottom is,” said Daniel Deming, a managing director at KKM Financial. He also said the break below $43.80 caused more worries for technical traders.
The Energy Information Administration said Wednesday that U.S. crude inventories decreased by 2.5 million barrels, lifting energy stocks and oil prices.
“The bulls will tell you it’s a supply issue, but look no further than China and you’ll see lesser demand,” said Nick Raich, CEO of The Earnings Scout, noting China’s Shanghai composite is lagging other major stock indexes.
Crude futures for August delivery pulled back 2.25 percent. Oil prices fell more than 2 percent Tuesday and entered a bear market.
“If we break below $40, all bets are off and the threat of inflation would be over,” said Peter Cardillo, chief market economist at First Standard Financial.
Oil also posted its worst first-half performance since 1997.
Crit Thomas, global market strategist at Touchstone Investments, said he is not overly concerned about oil’s latest pullback, however. “We’ve already seen energy underperform for most of the year and that hasn’t derailed the broader market,” he said.
The major U.S. equity indexes closed lower Tuesday as energy stocks faced pressure from oil’s sharp fall, but the Dow managed to hit a record intraday high.
Stocks have been on a tear this year, with the S&P rising more approximately 9 percent, largely led by information technology. The tech sector has jumped nearly 20 percent this year as shares of large-cap stocks in the space have risen sharply. Tech’s rise has also boosted the Nasdaq composite, which is up 15 percent year to date.
In economic news, mortgage applications rose 0.6 percent as interest rates remained low. Existing homes sales unexpectedly rose in May to the third highest monthly level in a decade, up 1.1 percent to a seasonally adjusted rate of 5.62 million units.
Treasury yields traded slightly higher, with the 10-year Treasury yield near 2.17 percent.
Overseas, European equities traded mostly lower, with the pan-European Stoxx 600 index slipping 0.26 percent.