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The U.S. stock market suffered broad declines Wednesday as global energy prices continue to crater. In fact, crude prices are approaching a historic bear-market level, with oil dropping 45.1% since September of 2013.
Energy stocks slumped yet again as oil prices hit a five-year-low. Exxon Mobile Corp. (NYSE: XOM) was one of the day's worst performers on the S&P 500, falling nearly 3%. Shares of multinational Chevron Corp. (NYSE: CVX) slipped 2%.
The VIX, the market's volatility gauge, soared 24.51% on the day.
Dow: 17,533.18, -268.05, -1.51%
S&P 500: 2,026.14, -33.68, -1.64%
Nasdaq: 4,684.03, -82.44, -1.73%
What Moved the Markets Today: The markets slumped on renewed global concerns about oversupply in the oil markets. Energy Information Administration crude inventories registered higher than analysts expected this morning, with 1.5 million new barrels added to U.S. storage last week. Analysts at Bank of America Corp. (NYSE: BAC) said today that the political infrastructure of OPEC could soon collapse, oil will fall to $50 per barrel, and weak producers will be shaken out of the international market. The energy sector is the worst-performing component of the S&P 500 on the year, falling more than 15%. However, the decline could serve as a $1 trillion stimulus for Americans who have endured years of high gasoline prices at the pump. Some energy economists are projecting that a gallon of gasoline could fall below $2 in states along the Gulf of Mexico that are proximate to refineries and impose lower energy taxes.
Now check out the day's most important market notes:
- Banking Bad: Shares of J.P. Morgan Chase (NYSE: JPM) dropped 2.83% after Federal Reserve Vice Chairman Stanley Fischer said the company could fall short of new capital requirements proposed by the central bank. Fisher said that JPM was the only one of eight large U.S. banks that would be undercapitalized under the new rule. Fischer, speaking during a Q&A session, said the bank is $21 billion short. The announcement is quite rare for a Federal Reserve official to make. However, one could argue that public statements could become part of the growing tyranny of global central banks, as Money Morning's Shah Gilani explains here.
- Airline Stocks Soar: The global airline sector is now expected to see a $10 billion reduction in oil costs in 2015, according to Barclays Plc. (NYSE ADR: BCS). Shares of United Continental Holdings Inc. (NYSE: UAL) jumped more than 4.2% intraday as crude prices declined. Shares of American Airlines Group Inc. (Nasdaq: AAL) were up more than 3% intraday. A number of U.S. airlines are approaching 52-week highs, but that won't stop companies from imposing bag and ticket fees as a way to boost profits in the new year.
- Housing Hopes: Shares of homebuilder Toll Brothers Inc. (NYSE: TOL) slipped 7.85% on news the company missed quarterly earnings expectations but beat quarter revenue estimates. Toll reported per-share earnings of $0.71, down from consensus estimates of $0.73. Meanwhile, shares of single-home builder and designer Hovnanian Enterprises Inc. (NYSE: HOV) jumped more than 5% on a strong fiscal fourth-quarter earnings report. The company reported that home sales increased 18% year over year.
- Cutting Back: Shares in Airbus Group (OTCMKTS: EADSY) slid more than 10% this afternoon, the stock's worst one-day performance in more than six years. The airline manufacturer announced it expects to report flat profits in 2016, undercutting previous investor confidence in the brand. Shares of Boeing Co. (NYSE: BA) were not immune to its rival's announcement, falling 3.87% on the day.
- China Problems Continue: Shares of Yum Brands Inc. (NYSE: YUM) slumped 6.24% on news the company slashed its 2014 profit forecast. The firm is still slowly recovering from a food safety problem created by one of their Asian meat and fish suppliers. The scare has significantly affected sales in China. The firm has now slashed its July profit forecast by 20%.
Now our experts share some of the most important investment moves to make based on today's market trading – for Money Morning Members only:
- How We'll Profit from Europe's Secret "Plan B": During the depths of the European sovereign crisis, when Greece was inches from exiting the zone, others chose to not sit idly by. Instead, two member nations were surreptitiously preparing for a possible Eurozone breakup. Even more fascinating is what came next, as it appears preparations are still in active mode. Other investors will wish they knew as much as you…
- This Country's Huge "Pricing Error" Will Send These Shares Soaring: The Saudis are very frustrated about losing control over pricing power they've held for decades. It's annoying them to no end, in fact. So, they're fighting back the only way they know how to shift the balance back in their favor – by starting a price war with the United States. But Money Morning Chief Investment Strategist Keith Fitz-Gerald says they've made the biggest strategic "pricing error" in the kingdom's history. And in doing so, they've actually cleared the way for America's shale energy boom and opened up a killer opportunity for one company in particular.
- One Stock That Will Profit from a New, Breakthrough Medical Direction: Modern medicine, for all of its sophisticated drugs, complex gadgets, and amazing surgical procedures, rarely cures anything. It treats. It manages. It postpones the inevitable. But return a patient to normal, optimal health? Rarely. So when an innovation comes along that can effect a complete and permanent remission of disease or restore damaged organs to a pristine state, it should cause your keenest investing instincts to perk up and pay attention…
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.