Stocks fall, oil rises as Egypt's turmoil roils markets
Crude oil nearly hits $100 a barrel in New York as Egypt's political standoff gets more dangerous. Stocks tumble, despite strong June auto sales.
Stocks surged Tuesday for a second day in a row in the morning but faded in the afternoon -- as a potentially larger story emerged that may hit stocks Wednesday: rising oil prices.
Light sweet crude oil (-CL) nearly hit $100 in New York on Tuesday as turmoil grew in Egypt. How that story plays out may affect global markets over the next few days. Light sweet crude was trading at $101 a barrel early Wednesday, and stock markets around the world were mostly lower.
The irony of the gains for crude in New York -- as well as Brent crude in London -- is that those price increases have come as U.S. pump prices have fallen for the last 20 days in a row. The big question is if the declines will continue. A sudden and steep increase in pump prices will hurt consumers both financially and psychologically.
The result of the TV pictures of millions protesting in Cairo. as a power struggle between Egyptian president Mohammed Morsi and the Egyptian army worsened. was to gut a decent U.S. stock market rally. Stocks did rebound a bit from afternoon lows.
The Dow Jones industrials ($INDU) had been been up as many as 140 points but closed down 43 points. The loss could have been worse. The Dow was down as many as 104 points around 2:35 p.m. ET.
The Standard & Poor's 500 Index ($INX) fell 1 point to 1,614. But the ride to that level included a gain of as many as 18 points and a swing to a decline of 8 points.
The Nasdaq Composite Index ($COMPX) was off 1 point as well, after seeing a 20-point gain slide briefly to a 19-point loss.
Futures trading early Wednesday signaled a weak open ahead for stocks.
Tuesday's gyrations were due to the worry about Egypt -- and then hope things might turn out all right. In addition, there was terrific news on auto sales. Automakers had their best month in some six years, with June sales hitting an annualized sales rate of 16 million units. Growth in pickup sales was a big reason for the sales gains.
Light sweet crude oil in New York settled at $99.60 a barrel, up $1.61 from Monday and up $3.04 a barrel this week. It moved higher in electronic trading later in the day and is up more than 4% this week alone.
Brent crude, which has a outsized influenced on U.S. retail gasoline prices, added $1 to $104 a gallon. Brent was at $104.75 a barrel in early Wednesday trading -- a gain of 2.5% this week.
Despite those increases, there's been that decline in gasoline prices. According to AAA's Daily Fuel Gauge Report, the average price of regular unleaded gas has fallen from $3.632 a gallon on June 13 to $3.478 on Tuesday, a decline of 15.4 cents, or 4.2%.
The decline has been big enough that only Hawaiian and Alaskan drivers are dealing with prices above $4 a gallon and may be a strong reason that consumer confidence has been rising recently.
But that confidence may become damaged by the rising tensions in Egypt between Morsi and his Islamist supporters, and young people and the army. The army demanded Morsi patch relations with his opponents by Wednesday -- or the army would impose its own resolution. Late Tuesday, Morsi defiantly refused to resign.
The risk of Egypt is not its production, which is relatively small. A big risk is what happens if the Suez Canal shuts down, disrupting some shipments to Europe. And an even bigger risk is if the turmoil in Egypt affects oil production elsewhere in the Middle East.
Here in the U.S., we will find out just how big oil reserves are elsewhere, particularly from all those shale deposits that have been boosting U.S. oil production in the last few years after years of decline.
The growth in crude production is driving the biggest drop in crude imports in two decades. Another casualty: Rates for the oil tankers most reliant on the shipments are the weakest at least 16 years, Seeking Alpha noted today.
Should pump prices start to move higher and stay higher for an extended period of time, you could see those nice auto sales get hurt.
Stocks, meanwhile, we face what in theory should be a quiet day on Wednesday -- because markets close at 1 p.m. ET. Volume already has moved lower as Wall Street heads to the beach or the mountains for an extended holiday weekend.
But Egypt and a resumption of worries about political turmoil in Portugal that could upset austerity plans weighed on markets early Wednesday.
There are economic reports due Wednesday that could also move markets:
- The ADP National Employment Index, which tracks private employment trends.
- The monthly report on big layoffs from Challenger Gray Christmas
- The Institute for Supply Management's monthly report on the non-manufacturing report.
Twelve of the 30 Dow stocks were higher, along with 204 stocks in the S&P 500 and 40 stocks in the Nasdaq-100 Index ($NDX). The index finished up 2 points to 2,930. Apple (AAPL) helped, rising $9.27 to $418.49.
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Any excuse even if one of the princes gets a cold to raise oil prices...
Since oil changes everything and it is controlled by thieves we either take control of it and stabilize the price or suffer longer.
Egypt is having problems....does that mean all of a sudden all the other nations start needing more oil? Yes I know it is a global situation...oil........but maybe.....the time will come that oil is not that big of a deal?.......I may be dead but would love to see the young Americans kick this opec out of their sandbags.
It's CORRUPTION AND GREED by people who know you can't do anything about it. It will not change because politicians are getting RICH so therefore to them there is no problem. They don't even pay for their own gas so what the hell do they care. People in this country losing time from work due to government sequester while we give our money away to other countries.
This is the kind of government you expect to help the AMERICAN people. All they are worried about is our tax dollars.
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Energy companies are lining up for approval to ship an ultralight type of crude called condensate.
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