The Week Ahead: Oil!

Stocks moved lower throughout the week as rising oil prices raised broader economic concern.

The Dow Jones Industrials moved 3.9% lower, while the S&P 500 fell 3.5% and the Nasdaq Composite slipped 3.3%. The decline was broad reaching, as seen by the similar moves across the diverse indices.  

The blame for the tough week clearly fell upon oil. Crude oil futures for July delivery started the week just under $127, and ended it at $130.51, touching a high of $135 on Thursday. Meanwhile, just ahead of the big Memorial Day weekend, one that is well known for motor vehicle traffic, gasoline prices skyrocketed as well.  

June futures for gasoline started Monday morning at $3.23 a gallon on the Mercantile Exchange, and closed Friday at $3.32. The good news is that oil and gasoline prices backed off Thursday’s highs to close the week a step lower. However, stocks found no solace in that news, since the slide likely came on profit-taking, not fundamental reasoning. However, the highs probably likewise benefited from trading momentum, so the slip was good news just the same. 

Wednesday fueled the most recent energy spike, as the Energy Information Administration reported a weekly draw of 5.4 million barrels of oil from storage. Meanwhile, the media had much to feed the frightened with as well. Oil executives were grilled on Capitol Hill this week by a Senate panel. The Senators highlighted the contrast of oil company profits and excessive executive compensation with the inflation burdened American public and an economy that teeters on recession. 

However, as the stock market worries about the impact of high gas and other prices, it likely also foreshadows a price-induced conservation of energy that should decrease demand for it. In other words, a threshold looks to have been passed, where people will actually now seriously consider travel distance and other fuel expenditures in their plans. This seems to indicate that petroleum might trade in a range in the near term. You’ll want to check into the Wall Street Greek website this week, as we are preparing an in-depth petroleum market report.

The Week Ahead

 

The abbreviated trading week still holds a powerful concentration of economic data on the schedule. May Consumer Confidence is set for Tuesday, and will compare with a reading of 62.3 in April. New Home Sales for April follow Friday’s Existing Home Sales data, which while down, still beat expectations. Seasonal impact and dramatically low levels to compare against might offer a positive surprise in this report. Sales ran at an annual pace of 526K in March, missing that month’s consensus expectation by a mile.  

Wednesday’s Durable Goods report and Thursday’s Corporate Profits seem poised to stab economic hopes in the back. Most reports show that corporate profits were down sharply this past quarter. Speaking of Q1, GDP will find its first revision on Thursday, and we could see the number reported in contraction territory or close to it, from its first reporting at +0.6%.  

Get ready to get busy on Friday, with a grand slam of reports due, including Personal Income & Outlays, the Chicago area manufacturing report, University of Michigan Consumer Sentiment and Farm Prices to close it out.  

The earnings schedule includes: Tuesday – Borders Group (NYSE: BGP), Vodafone (NYSE: VOD); Wednesday – National Bank of Greece (NYSE: NBG), Chico’s FAS (NYSE: CHS); Thursday – Costco (Nasdaq: COST), Hellenic Telecommunications (NYSE: OTE); Friday – Lion’s Gate Entertainment (NYSE: LGF), Tiffany & Co. (NYSE: TIF) and many more.

Comments

[galewhitaker]

Joe Sixpack maybe changing his driving habits because of higher gasoline prices but there are hundreds of millions of people around the world who are able to buy subsidized fuel and are paying about 45 cents a gallon. I don't think that the price of gasoline in rhe US is going to go back down because of lack of demand for crude oil.

[surgcare]

Finally someone who gets it -galewhitaker -congrats