Oil Prices Drag On Dow Jones; Chips, Airlines Rally| Investor’s Business Daily

Oil prices fell hard Friday, sending the Dow Jones and S&P 500 lower, while the Nasdaq trimmed its early losses to trade flat in a short, post-holiday session.




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Energy names led the early downside in today’s stock market, with Exxon Mobil (XOM) and Chevron (CVX) falling hardest among Dow Jones stocks. On the S&P 500, oil-related stocks posted 19 the index’s 20 worst early declines. Tesla (TSLA) slumped after announcing it would cut prices of its cars being sold in China.

On the upside, defense contractor Rockwell Collins (COL) led the few advancers on the S&P 500, and Dow Jones stock United Technologies (UTX) jumped 2.8% after announcing regulators in China had approved the companies’ planned $30 billion merger.

The Dow Jones industrials tanked 0.7% at the starting bell, then trimmed its loss to 0.4% The S&P 500 also traded 0.4% lower. The Nasdaq Composite reversed its early decline and defended a narrow gain, as China names JD.com (JD) and NetEase (NTES) led the declines among Nasdaq 100 listings, and as chipmaker Micron Technology (MU) and American Airlines (AAL) each surged more than 2%.

Markets close at 1 p.m. ET Friday, a session during which trading volume has historically been light. But pre-holiday market volume was unusually heavy on Tuesday, with the selling reportedly driven by automated trading programs. Stocks struggled to take back some of those losses on Wednesday, although the market had already shifted to “in correction” status.  Savvy investors are looking to raise cash where possible, and to avoid making any new buys or adding to positions until the market logs another follow-through day, and IBD’s market pulse raises the “confirmed uptrend” flag.

Oil Prices Slide On Supply Fears

Oil prices were a driving factor in Friday’s premarket trading, with West Texas Intermediate swooning 7% to below $51 a barrel. The cause of the declines appeared to be general worries about weak demand, particularly from China, and rising output from shale oil producers in the U.S. JPMorgan this week slashed its price outlook for oil, now saying that Europe’s Brent crude benchmark will average $73 in 2019, down from its prior price forecast of $83.50. Brent crude traded down 4% early Friday, at just above $6o per barrel.

U.S. oil prices have now fallen more than 20% in November alone, outpacing the monthly losses recorded during the dive into the oil glut in 2014, and nearing the declines seen in the sell-off that followed oil’s spike to a record high, near $150 a barrel, in late 2008.

Natural gas prices climbed out of early losses and rose 0.3%, to trade around $4.47 per million British thermal units. Cold winter weather and tight gas inventories combined to drive gas to near $5 last week. Although trading below last week’s highs, gas prices remain up 31% in November, marking their strongest month since September 2009.

Exxon, Chevron Drag On Dow Jones; Tesla Drops On Price Cut

Big energy names, particularly Chevron, had held their ground vs. the recent slide in oil prices. But Friday’s big drop sent Chevron down 3.2% and Exxon to a 2.6% decline in early trade. Chevron stock has been straining to regain support at its 10-week moving average in a six-month consolidation. Friday’s early action sent shares well below support, and toward a possible test of prior lows near 107.

Exxon had already given up its key levels of support, and on Friday undercut the stock’s prior-week lows, to trade at its lowest level since May

On the S&P 500, Concho Resources (CXO), EOG REsources (EOG) and Pioneer Resources (PXD) led the early declines.

Airlines were a bright spot, rallying as low oil prices pointed to savings in fuel costs — airlines’ single greatest expense. American and Delta Air Lines (DAL) popped more than 2% apiece. United Continental (UAL), Alaska Air Group (ALK) and Jetblue Airways (JBLU) each gained more than 1%.

Among tech stocks, the big FANG tech leaders traded unanimously lower, although losses held to less than 1%.

Tesla dropped 1.2%, after the company announced Thursday it would trim between 12% and 26% from the price of its Model S sedan and Model X SUV being sold in China. U.S. tariffs against China had pressured higher the cost of U.S.-made cars sold in China. Tesla shares are trading below a 357.678 buy point in a three-month cup-with-handle base.

Rockwell, United Technologies Receive Nod From China

Rockwell Collins surged 8%, while Dow stock United Technologies reversed its 4% gain into a fractional decline. The companies announced that China’s State Administration for Market Regulation had completed its review of their combination, proposed in September 2017.

The companies, which had anticipated approval and already had joint, interim teams collaborating on areas where the companies plan for alignment, said the deal would close within three business days.

Rockwell shares have been trading below support in a 12% deep consolidation. United Tech also slipped away from support in the past week, but remained well off its late-October low, in a nine-week consolidation.

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