U.S. stocks rally, then tank Wednesday. Suez mishap influences oil shares
WASHINGTON – Wednesday’s markets opened with a nifty rally. U.S. stocks, particularly non-tech stocks, kept the fun going all day. But then everything tanked at the 4 p.m. closing bell. The only “good” news? A big container ship firmly wedged at an angle in the Suez Canal has likely blocked that crucial waterway – and oil tanker superhighway for days to come. That goosed this week’s sinking oil prices, giving a break to long suffering shareholders, though oil remains wobbly Thursday morning.
A weird and wobbly Wednesday on Wall Street
CNBC posted a pretty good rundown on Wednesday’s Wall Street action. It highlights the following data points.
“The S&P 500 gave up earlier gains and closed in the red Wednesday as tech stocks sold off, continuing a market rotation out of high-flying growth names.
“The equity benchmark dipped 0.5% after rising as much as 0.8%. The tech-heavy Nasdaq Composite dropped 1.9% as Big Tech underperformed. Apple and Netflix fell more than 1% each, while Facebook slid 2.5%. Tesla slipped 3.6%. The Dow Jones Industrial Average gained 170 points as Caterpillar jumped more than 3%.
“Oil prices bounced back more than 6%, boosting energy stocks. EOG Resources and Marathon Oil popped more than 5% each, while Diamondback Energy climbed 6%. The material and financial sectors also outperformed, rising more than 1% each.”
What does it all mean for U.S. stocks? Who knows?
But I offer a few guesses and one or two additional thoughts on the subject of oil stocks and U.S. stocks in general.
The past couple of weeks have been an exercise in frustration for any serious investor. Whether it’s the daily nonsense and speculation, the latest antics of the current Wrong Way Corrigan administration in Washington, the sheer mendacity of the anti-gun, anti-democratic republic Maoists running the House, or the latest multi-masking demands from the horrible Dr. Fauci, investors are mightily confused. And Wednesday’s trading action proved it.
Some of this, of course, may be the usual end-of-quarter “window dressing,” in which funds and investment advisors do a mass-dump of failing shares so they don’t have to report those stinkers as part of their investment holdings.
But I also suspect that the crazed legislation and that hat trick of Presidential pratfalls most of us watched Biden take a couple of days ago have started to haunt investors as well. Insurance companies and investors alike hate uncertainty. And uncertainty as to the future of our democratic republic is about as bad as it gets these days.
Wednesday’s key momentum charts
You can see this in today’s closing VIX volatility numbers, as per the following chart.
Tuesday’s closing McClellan Oscillator chart indicates we’re close to a near-term market bottom, at least in U.S. stocks and averages. Today’s initial rally might have tempted bulls to get ahead of themselves Wednesday morning. But, lacking Wednesday’s closing Oscillator chart as of this writing, we’re not quite sure whether we’re still in trouble or about to turn.
Back to the oil patch
Meanwhile, how about that kick in the tail today for ailing oil stocks? Here’s a quick rundown via Fox Business, which has a pretty good reportorial product these days, save for that unbearable Never-Trumper, Neal Cavuto. But let’s get back to today’s oil-price-influencing Suez mishap.
“Oil prices have been on a wild ride for the last 24 hours, and that ride may continue after a mishap in the Suez Canal that is raising concerns about the availability of a much-needed global oil supply.
“A huge container ship, trying to be a ship’s version of a square peg trying to fit into a round hole, got stuck and while there are early reports the ship may be free soon, oil volatility has ramped up pushing prices back above the $60-per-barrel level.”
Nicely behaving, high-dividend-paying oil stocks
Still stuck in the Suez canal as of Thursday noon ET, that wayward container ship sure put some pep in the step of our small portfolio of oil stocks Wednesday. Our portfolios are massively ahead already on shares of EOG (NYSE:EOG), and modestly ahead on holdings of Exxon-Mobil (NYSE:XOM), Italian oil major Eni (NYSE:E). And we are at about breakeven on a small, recently acquired holding of the Williams Companies (NYSE:WMB). So I’ve been watching these shares sink lately and considered selling Wednesday should this persist. But they remained in the portfolio as of COB Wednesday. We’ll see about Thursday.
Ditto another highly profitable position in major oil refiner Valero (NYSE:VLO). Things simply looked a lot better Wednesday in the oil patch, thanks to that messed up mega-container wedged in the Suez canal. I wonder how long that ship’s captain (or Suez pilot) gets to keep his job once they unwedge that massive container ship. Details remain sketchy.
Oil could be a winner. But it would be a winner were it not for the “Biden-Harris” administration’s boneheaded “green” energy agenda
Selective investing in the oil patch still remains a good but somewhat risky idea, given who’s (illegitimately) in charge of killing capitalism in Washington. Namely, the now-renamed “Biden-Harris Administration.” Catching a hint of future political maneuvering here? It’s a feature, not a bug. Washington remains a mega-risk today for all investors, whether they voted Democrat or Republican last fall.
Meanwhile, whether Dr. Fauci approves or not, the US economy is opening back up. My observation is based on the success of Florida, which proves that virtually no lockdowns at all don’t result in any more deaths per-capita than full-lockdown Blue State regimes like the People’s Republic of California. Other Red States like South Dakota, Texas, et. al. also lead the way out of the current economic morass. (I’ll have more to say on all this in a future article.)
More lockdowns in the Eurozone. Does this flimsy excuse for a virtual country have a death wish?
Contrariwise, what freaks out oil markets these days? The increasing tendency of countries in the Eurozone to force a new round of complete, draconian lockdowns on their citizens out of fear of Round 3 (or Round 4?) of another “coronavirus surge.” Lockdowns mean slowdowns, which mean unemployment rises. Meanwhile, it looks as if absurd travel restrictions are once again to come down hard on airlines and cruise vessel owners. Both of which use a lot of fuel. Except when they’re grounded or drydocked.
Both Germany and the UK went out of their way to prohibit their citizens from conducting any aspect of that dangerous thing called life. Interestingly, however, it was Germany’s Angela Merkel who chickened out today on her draconian lockdown orders. It remains to be seen whether the disappointingly hapless Boris Johnson will follow suit.
But as for today, Merkel’s backtracking might have helped boost oil, along with that mess in the Suez. Now, investors get to guess what happens next? The prospect of a totally locked-down-all-summer Eurozone whacked the hapless cruise ship industry, again, today, and airlines weren’t doing their happy dance either. But I already covered that.
It might be too late to escape the globalist oligarchs. But at least we can trade stocks. For now…
Western governments, completely corrupted by their oligarchy-funded globalist preferences, tend to overreact to almost any economic situation today. This tends to transform mere economic and market setbacks into disasters. None of this has to happen. But current Western governments are giving us serial economic disasters, and they’re giving them to us good and hard. A subtle form of Cloward-Piven offers the blueprint for what’s really going on here: the impoverishment and demoralization of the middle classes.
Who elects these political cretins, anyway? This is no way to run a country, whether it’s the US or the Eurozone. Or any country, for that matter. Is Venezuela our new globalist model? Holy Third World, Batman! But investors always need to deal with present reality. And without Trump at the helm in the US, there’s no one left to put a thumb in the dike holding back impending disaster.
Well, at least some portfolios escaped Wednesday’s end-of-day setback when a load of key U.S. stocks decided to end the day by tanking. But, as usual, neither I nor anyone else can offer a convincing argument for what might happen Thursday. So the weirdness continues.
More of the same Thursday morning. Moving right along, the continued selling pressure on U.S. stocks today likely involves more end-of-quarter window-dressing. As predictable as it is fraudulent, at least in my learned opinion.
That said, we also can see Mr. Market attempting to fight back to breakeven as we approach the noon hour Thursday. We will post a new column later this afternoon if the situation warrants. Stay tuned.
— Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect.