Medicare Agent News: Oil Jolts the Market

Monday, April 3, 2023

Oil Jolts the Market

By Lawrence C. Strauss | Monday, April 3

Oil Shock. Stocks had mixed results Monday amid surging oil prices and a weaker U.S. manufacturing number.

The Dow Jones Industrial Average gained 1%, the strongest showing among the major U.S. indices, followed by a 0.4% for the S&P 500.

But the tech-laden Nasdaq Composite, a key first-quarter driver of the market, pulled back, finishing down 0.3% on the day. The Russell 2000 Index, which holds small-cap names, was flat.

The market had to digest mixed signals. On the one hand, crude prices climbed on news of a production cut led by Saudi Arabia. Crude oil futures gained $4.75 per barrel, or 6.3% to, $80.42 -- its largest one-day dollar gain since July 2002, according to Dow Jones Market Data.

Shares of Chevron, the integrated energy giant, were up about 4% on the session. It was one of the leading market movers Monday along with United Health Care, which gained 4.6%.

But as my colleague Avi Salzman points out, the futures market is skeptical about whether the recent pop in oil prices will last.

"In fact, the oil futures market seems to show that they expect prices to retreat after the near-term price shock," he reports.

While higher oil prices could pressure inflation, which the Federal Reserve has been struggling to tame, one key economic indicator pointed to some cooling. The ISM manufacturing index was 46.3 in March, down from 47.7 the prior month.

"Although that leaves it slightly above the lows reached at the start of the year, the new orders index is very much in recessionary territory," Andrew Hunter, deputy chief U.S. economist at Capital Economics, observed in a note.

Jose Torres, senior economist at Interactive Brokers, wrote that central banks are facing a dilemma.

"While the announcement may be good news to U.S. energy companies and their shareholders, it is creating another challenge for central banks that are seeking to stymie price increases without sparking recessions," he wrote.

Energy, meanwhile, was by far the best performing S&P 500 sector with a gain of 4.5% on Monday.

Treasuries also rallied, sending yields lower. (Bond prices and yields move inversely.)

The two-year Treasury's yield slid by about eight basis point to settle at 3.978%. The 10-year Treasury's yield declined by about six basis points to close at 3.43%.

MarketWatch cited the latest ISM data as a key factor driving those bond yields lower.