When the U.S. stock market opened with a 2% drop, it seemed that today’s session had already been made by sellers. Additional melancholy for Tuesday’s prospects came from a huge drop in oil prices – the US benchmark WTI futures fell 9%, and prices “broke” the psychological level of $100 per barrel.
Dow Jones remained in the negative territory
the beginning of purchases in the technology sector supported by the interest of investors to the consumer sector stocks changed the landscape completely on both the New York Stock Exchange and Nasdaq, the composite index of which went from negative to strong positive by 1.75%. While the S&P 500 broad market index also turned green for the close, it did so less steadily, and ended up settling for a gain of only 16 hundredths of a percent.
As for the Dow Jones index, Chevron (CVX) -2.63%, Caterpillar (CAT) -2.545 and International Business Machine (IBM) -2.48% did their best to keep the main U.S. stock index up and helped it record a negative close of 0.42%.
Which is better than the Dow Jones or Nasdaq? Photo: CNBC
And the Dow leaders were Nike (NKE) +3.1%, Salesforce (CRM) +2.38% and Apple (AAPL) with a modest +1.89%. In Big Tech stocks, meanwhile, the tone was set by Alphabet (GOOG) +4.41%, Amazon (AMZN) +3.6%, Tesla (TSLA) +2.55% and Microsoft (MSFT) +1.23%.
European investor morale is at a low
The stock indices of the Old World were unaware of such high intentions of American investors, so they lost more than 2% on the pan-European benchmark Eurostoxx 600 without a fight. This happened as the European currency fell to a 20-year low and on expectations of an economic slowdown amid an impending recession.
Exactly into the theme came the July data of the economic index Sentix, which showed a drop in investor morale in 19 countries of the euro area to its lowest index since May 2020, while pointing to the “inevitable” recession. Unwittingly, MarketWatch data reminds us that Bridgewater Associates, the largest U.S. hedge fund, increased its short positions in European indices to $9 billion in June.
Uniper stock continues to catch bottom
After Monday’s 27% plunge, Uniper stock (UNPRF) continues its strong plunge. On Tuesday, the securities of Germany’s largest electricity supplier fell an additional 9%.
Until recently, the German company was Gazprom’s partner in the international Nord Stream 2 project, and its shares were quoted above €40. Now its business needs help from the German Federal Government, its shares are close to €10 and its market capitalization has fallen over 75% since the beginning of the year. Pity about our partners, Vladimir Vladimirovich would say.
They say you should buy when you’re scared. This is probably exactly the situation. In the report published on July 5, JPMorgan maintained a “buy” rating on this paper with a target price of €32.00. A similar rating from Citi remains active on TipRanks, with a target price of €26.60, although it was updated the last day of June.
Oil and gas stocks will remain the best sector
Oil prices have been knocked down powerfully, artfully, and beautifully. The price tag for West Texas Intermediate WTI broke through $98 a barrel at the peak of the bearish attack inside the session, and North Sea Brent was below $102. But what we want to pay attention to.
Immediately striking are the results of the European session, where European oil and gas plunged below nothing – Shell and BP each lost seven and eight percent in London. But it should be noted that Europe did not catch the positive reversal during the U.S. session. And just there, in spite of a clearly strong bearish opening, oil and gas securities traded not too badly.
Of course, losses in ConocoPhillips (COP) and EOG Resources (EOG) were a blur, but the industry’s major majors didn’t fall as critically. Shares of the largest U.S. oil company are down 3.13%, while the sector’s vice-champion Chevron (CVX) is only 2.63% cheaper. At the same time, Occidental Petroleum (OXY), the most profitable securities of the current year, plus 90% for the half year, lost only 2.2%.
The day before we mentioned the opinion of Raymond James analysts, who, assuming not the easiest year and potential volatility, still recommended buying spills in oil stocks. As cliché as it may seem, the classic approach recommends buying what goes up, not what goes down.
Trend Is Your Friend
In this regard,
we need to look at the long chart, and it clearly shows the strength of the energy sector
at the moment.
Taking into account that the S&P Energy is now on the rise since the beginning of the year by almost 30%, while the broad S&P 500 index is currently down by twenty, the conclusion about the sector’s position is self-evident.
It is also possible to draw a technical conclusion from the current situation. There is a clear divergence on the charts of oil and shares of oil and gas companies. Oil substantially renewed its two-month low, and oil securities weren’t even going below their weekly lows.
I don’t believe in a more or less sane pullback, much less a reversal in the market at this point. So buying tech stocks could turn out to be trouble any day now. And the trending situation in the oil and gas sector has every chance to continue. The trend is your friend, don’t forget. And good luck investing.