Market Review: Record Oil Prices Take Their Toll
Email This Article
Print This Article
Digg This
Delicious
SubscribeMOST POPULAR ARTICLES
- Kaeppel’s Corner: Citi Bailed Out; Other Turkeys Don’t Fare As Well
- Weekly Outlook: December 1, 2008
- Optionetics News Release: Launch of Platinum Online Training
- Closing Wrap-Up, December 2
- Midday Action: December 3
- Analytical Toolbox: Whoosh … The Sound of Volatility Exiting the Market (For Now)
- The Sector Spectre
- Option Watch: Dec 2—Bulls Painting a Mosaic?
- Growth Stock Swing Option: November 26, 2008
- Interview Central: Charles Payne, Part II
- Kaeppel’s Corner: Citi Bailed Out; Other Turkeys Don’t Fare As Well
- The Sector Spectre
- Optionetics News Release: Launch of Platinum Online Training
- Weekly Outlook: December 1, 2008
- Midday Action: December 3
- Lessons from My Grandmother, Part V: The Choice Is Yours
- AU Editorial: Is All Forgiven?
- Economic Watchdog, November 26
- Growth Stock Swing Option: November 26, 2008
- Interview Central: Charles Payne, Part II
- Kaeppel’s Corner: There’s Always a Bull Market, um - Somewhere?
- Outside the Box: Locating Strong Stocks in a Bearish Environment
- Foreign Exchange: Christmas Bonus
- Option Watch: Dec 2—Bulls Painting a Mosaic?
- The Sector Spectre
- Tech World: Diamond Foods Continues to Expand Operating Margins
- Midday Action: December 2
- Growth Stock Swing Option: Dec 1, 2008
- AU Editorial: Is All Forgiven?
- Lessons from My Grandmother, Part V: The Choice Is Yours
SPONSORED LINKS
May 23, 2008
US
Record oil prices have taken a toll on the US stock market this week. Brokerage houses have been increasing their predictions for oil prices. Goldman Sachs says that it believes that oil prices will be at $200 US barrel by 2010. That’s $70 US barrel or 35% higher than current prices.
Ford Shares fell this week after the company scrapped its long term plans to return to profitability in 2009. The company citied strong energy prices and rising steel prices as reasons and will be looking at cutting production of trucks, vans and sport utility vehicles.
Home Depot and Target fell this week on the back of weaker profit results. Home Depot saw a 66% decline in 1Q net income.
Federal Reserve cut its 2008 growth forecast and warned of higher unemployment, reducing prospects of an interest rate hike later this year. Fed lowered its 2008 growth projections dramatically from 1.3%-2% made 3 months ago down to 0.3%-1.2% from its estimate. Inflation risks have increased, with the Fed raising its core inflation forecast to between 2.2%-2.4% from between 2.0%-2.2% previously.
Asia
BOJ meeting saw interest rates remain unchanged at 0.5% as expected. The Japan Tertiary index for March which measures the service sector rose by 0.3%. The market was expecting a rise of 0.5%.
Coal miners in Australia have been outperforming this week on expectation of more takeovers in the sector. This week, AcelorMittal took a 14.9% stake in Macarther Coal which has sparked expectations of a full takeover bid in the future.
The high oil prices have pressured transport stocks. Qantas and Jetstar are planning to slow the speed of their plans in order to conserve fuel.
UK
Air France is the latest casualty of high energy prices with the airline issuing a profit downgrade.
German business confidence saw an improvement with a reading of 110.1 when the market was expecting 108. However, the improvement in these numbers seems a little strange given the weakness in other manufacturing data. The Eurozone industrial orders dropped 1% in March.
The expectation is that we could see Eurozone interest rates rise higher. The President of ZEW predicted that the European Central Bank could raise interest rates.
End Note
Oil prices up 38% since the beginning of the year and up 104% in the last 52 weeks. The story of the past month has been the sudden surge in demand in China for diesel fuel. Power plants in some areas of China are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power. But the International Energy Agency is warning of a severe oil-production crunch. It is worried that demand for oil will outstrip world supply and is preparing a landmark revision of its closely watched forecasts. Financial stocks have continued to be bearish with analysts predicting that there is more to come of the credit crisis and that trading houses could still face losses. Commodity based currencies and stocks have been the place to be this week with many oil stocks hitting new record high prices and the Australian dollar now moving towards parity with the US.
Happy Investing!
Julia Lee
Head of Fundamental Analysis
HUBB Financial Group
Trading Tutors Team
© Copyright 1995-2008 Optionetics. All rights reserved. This material is for personal use only. Republication and re-dissemination, including posting to newsgroups, is expressly prohibited without the prior written consent of Optionetics. Optionetics is a registered trademark of Optionetics, Inc.