Did I miss an announcement about an OPEC Cut???
E W Y O R K -Sunday's announcement by Saudi
Arabia, Venezuela and Mexico that they will cut
back on oil production is weighing on stocks this
morning.
Today, Qatar, Iran, Libya and Oman announced that they
too will make production cuts. Oil prices are surging on the
news: Brent crude is up $1.91 per barrel at $15.13.
Low oil prices have been one of the legs behind this year's
rally in stocks. A glut in production, along with flagging
demand from Asia, has meant that U.S. companies could get
energy cheap. Nowhere have those gains been so dramatic
as in the airlines-the Amex Airline Index is up 17.5 percent
this year. PaineWebber airline analyst Samuel Buttrick
estimates that every dollar decline in oil prices decreases
industry expenses by about $450 million.
Low oil prices have also supported the bond market,
which, in turn, lends support to stocks. The rise in oil prices
will likely boost sentiment surrounding oil services stocks, but
it's hardly good news for the broader market.
Also worrisome for the market: Russian President Boris
Yeltsin's dismissal of the entire government earlier today.
Saying he was unhappy with the government's pace of
reform, Yeltsin sacked the cabinet, including Prime Minister
Victor Chernomyrdin.
So, things don't look so good-but neither do they look
so bad that it's time to start stocking up on canned goods and
potable water. While stocks look lower this morning, they
don't look horrible.
At 8:10 a.m. EST the S&P 500 futures are off 4.00,
indicating a lower open. The 30-year Treasury bond is off
7/32 at 103 2/32, lifting the yield to 5.91 percent.
Asian stocks actually managed to post modest gains
(admittedly, they didn't have to deal with the news out of
Russia).
In Japan, stocks posted modest gains. Trading was thin
ahead of the expected release of the newest economic
stimulus package later this week. The Nikkei closed up
38.36 at 16,868.83.
After the close, the Nihon Keizai Shimbun said in its
evening edition that the Japanese government has ordered the
Ministry of Posts and Telecommunications to use 1 trillion
yen from the postal savings and life insurance systems to prop
up the market.
Hong Kong stocks moved higher, with hopes of an
interest-rate cut continuing to support the market. The Hang
Seng climbed 30.10 to 11,594.33.
German stocks-the most sensitive of the major markets
to Russia-slipped. The Dax dropped 30.23 to 4971.31.
London stocks are only slightly to the downside.
"The surprising thing is, it's actually a fairly boring
morning," says Ed Gale, head of Jefferies' U.S. equity desk in
London. "Obviously oil stocks are higher. Things like
Schlumberger and Haliburton are trading up $2 or $3, with
the integrated oils not as strong. The interesting thing is, the
market was almost anticipating this on Friday." Indeed, oil
started gaining in the middle of last week, and the integrated
oil and oil service stocks followed.
The FTSE is off 5.0 at 5951.3. |
