By Mark DeCambre, MarketWatch , Chris Matthews
The bond market is closed in observance of Veterans Day
U.S. stocks are broadly lower midday Monday, as investors
digested developments in a stabilizing crude-oil market, and
contended with the effects of a rising dollar, as bond markets are
closed in observance of Veterans Day.
Read:Which markets are closed on Veterans Day?
(http://www.marketwatch.com/story/which-markets-are-closed-on-veterans-day-2018-11-09)
How are benchmarks performing?
The Dow Jones Industrial Average was trading about 420 points,
or 1.6%, lower at 25,570, the S&P 500 was falling 37 points, or
1.3%, at 2,743, while the Nasdaq Composite Index was also on the
decline, down 157 points, or 2.1%, at 7,249.
On Friday, the Dow fell 201.92 points, or 0.8%, at 25,989.30,
and the S&P 500 lost 25.82 points, or 0.9%, at 2,781.01, while
the Nasdaq Composite Index retreated 123.98 points, or 1.7%, at
7,406.90.
For the week, however, all three main benchmarks posted gains.
The Dow registered an increase of 2.8%, the S&P 500 returned
2.1% over the past five sessions, while the Nasdaq eked out a 0.7%
gain.
What drove the market?
Representatives from Saudi Arabia over the weekend said that the
kingdom would cut its oil production
(http://www.marketwatch.com/story/saudis-to-reduce-oil-output-as-opec-still-debates-production-cuts-2018-11-11),
while the Organization of the Petroleum Exporting Countries weighs
a more sweeping reduction of output by members of the oil
cartel.
West Texas Intermediate crude for December delivery rose 25
cents, or 0.4%, at $60.44 a barrel on the New York Mercantile
Exchange. The contract settled Friday at $60.19, marking the lowest
front-month contract settlement since March 8.
A shock lower in oil has raised questions among investors about
the health of the global market and investors will closely watch
talk of cuts to crude production that could stabilize moves in the
commodity, which entered a bear market
(http://www.marketwatch.com/story/oil-on-cusp-of-bear-market-as-supply-worries-persist-2018-11-08),
defined as a drop of at least 20% from a recent peak, last
week.
Worries about oil's effect on the market come as investors
continued to fret about China and U.S. trade tensions, with
President Donald Trump set to meet with Chinese President Xi
Jinping later in November at the sidelines of the G-20 summit to
discuss resolving their trade disagreements.
A rising dollar is also weighing on markets, as a rise in the
greenback can hurt sales of multinational companies, making goods
relatively more expensive to customers purchasing abroad.
What did the strategist say?
Michael Schoonover, portfolio manager at Catalyst Funds told
MarketWatch that recent market declines suggests we're seeing the
partial deflation of a "passive investing bubble," in which stock
prices have been driven irrationally higher by a growing share of
money invested in passive index funds and exchange-traded funds.
"We've seen generally low volume of late, which suggests that
institutional money isn't driving the market," he said.
Because many passive index funds are weighted by market
capitalization, massive companies like Apple and Amazon have been
responsible for much of the market's gains in 2018, creating a self
-reinforcing cycle that leads to higher and higher valuations for
the companies dominating the S&P 500, according to Schoonover.
Now we are seeing the inevitable repricing of stocks that were
artificially boosted by flows into passive, low-fee products.
"The price of oil has re-entered into a bear market, suggesting
that demand from the global economy has weakened as the trade war
hits the global economy," wrote Peter Cardillo, chief market
economist at Spartan Capital, in a Monday research note.
Craig Callahan, president and founder of Icon Advisors says that
oil's bear market has weighed heavily on the market in general, and
energy exploration firms in particular, creating buying
opportunities for value investors. "I'm considering adding to my
holdings in the energy sector," Callahan told MarketWatch.
"These firms have hedged the price of oil, and projections for
2019 [earnings-per-share] growth are 25% for the sector," compared
with just 9% for S&P 500, Callahan said.
Which stocks were in focus?
Shares of Alibaba Group Holding Ltd.'s(BABA)were in focus after
Chinese consumers bought $30.8 billion worth of goods in 24 hours
on Singles Day, surpassing last year's $25.3 billion
(http://www.marketwatch.com/story/alibaba-racks-up-record-308-billion-in-singles-day-shopping-2018-11-11).
The stock is down 2% Monday. Chinese retailer JD.com also stands to
benefit from the holiday--shares of the firm are up 1.6%.
Apple Inc.'s stock (AAPL) are down 4.4%, after Lumentum Holdings
Inc. (LITE) cut its earnings and revenue outlook, saying it
received a request from "one of its largest industrial and consumer
customers for laser diodes for 3D sensing" to "materially reduce
shipments," which is believed to be Apple
(http://www.marketwatch.com/story/apples-stock-dives-further-in-premarket-after-lumentum-cuts-outlook-2018-11-12).
Meanwhile, J.P. Morgan analysts cut their earnings estimates for
2018 and 2019, downgrading the stock.
SAP SE(SAP.XE)has agreed to purchase Qualtrics International
Inc. for $8 billion in cash
(http://www.marketwatch.com/story/sap-to-buy-software-firm-qualtrics-in-8-billion-deal-2018-11-11),
the companies announced Sunday. The company's stock is down 6.2%
Monday morning.
Shares of Athenahealth Inc. (ATHN) are rising 9.7% Monday
morning, after the health care services firm confirmed that it was
being acquired by affiliates of Veritas Capital and Elliott
Management Corp.'s Evergreen Coast Capital. The deal is worth $5.7
billion, and values the company at $135 per share, a 12%
premium.
Shares of Abiomed, Inc. (ABMD) are down 15.7%, after the results
of an FDA study into one of the firm's heart-pump products
disappointed investors.
Goldman Sachs Group Inc. (GS) stock is down 5.7% Monday, putting
it on pace for its largest percentage loss in more than two
years.
Shares of Aurora Cannabis Inc. (ACB.T) are falling 6%, erasing
earlier gains, despite the Canada-based cannabis company reporting
Monday fiscal first-quarter net earnings
(http://www.marketwatch.com/story/aurora-cannabis-earnings-tops-100-million-revenue-nearly-quadruples-2018-11-12)
that rose to $105.5 million from $3.6 million a year ago, and from
$79.9 million in the previous quarter.
British American Tobacco PLC(BATS.LN), Philip Morris
International Inc. (PM), and Altria Group Inc. (MO) stocks are
extending their losses
(http://www.marketwatch.com/story/altria-british-american-tobacco-stocks-fall-again-on-report-of-menthols-ban-analyst-says-buy-the-dip-2018-11-12)Monday,
after The Wall Street Journal on Friday
(https://www.wsj.com/articles/fda-to-propose-ban-of-menthol-cigarettes-1541795941)reported
that the Food and Drug Administration was planning to propose a ban
on menthol cigarettes. British American Tobacco shares have fallen
0.9% , Philip Morris stock is declining 1.1%, while Altria stock
has retreated 1.9%.
Shares of Pacific Gas and Electric Corp. (PCG) are tumbling more
than 16% at the start of trade, as the electric utilities company
continues to deal with the fallout of wildfires throughout its base
of operations in California. The company announced Friday afternoon
that roughly 25,000 of its customers were without power. The stock
of another California-based electric utility, Edison
International(EIX) , is down 9.8% Monday morning.
How did other markets trade?
In Asia , major benchmarks traded in the red, while European
indexes were facing selling pressure.
(http://www.marketwatch.com/story/asian-markets-drop-as-investors-jitters-return-2018-11-08)
The dollar, measured by the ICE U.S. Dollar Index , was up 0.4% at
97.30.
Gold was trading slightly lower as the dollar strengthened.
(END) Dow Jones Newswires
November 12, 2018 12:30 ET (17:30 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.