US Stocks Lower but Crude Oil Wipes Out August Losses
New York (Aug 31) Stocks were sharply lower by mid-afternoon Monday despite crude oil surging to wipe out August losses. The S&P 500 was falling 0.9% while the Dow Jones Industrial Average was down 0.66% and the Nasdaq was sliding 1.1%. Benchmark indexes were on track to close with their worst monthly losses since March 2012 as fears over China's economy and a potential further correction in Chinese equities worried investors.
Crude oil was having a great day after surging on new data that showed U.S. crude production at a lower-than-expected rate. Estimates for U.S. production over the first five months of 2015 have been lowered by between 40,000 and 130,000 barrels a day each month, according to the Energy Information Administration.
West Texas Intermediate crude rose 8.8% on Monday to $49.20 a barrel and added 4.4% over August. The Energy Select Sector SPDR ETF (XLE) added 1.1%. Crude closed out last week with its best weekly gain in six years.
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Gold closed 0.1% lower to $1,132.50 an ounce, its fifth loss in six sessions, but closed out the month with its biggest gain since January. The commodity has been viewed as a safe-haven asset as equities experienced extreme volatility.
China's government will not make big stock purchases to prop up the market anymore, according to The Financial Times. Over the past two months, state-owned investment funds and institutions have invested around $200 billion to support the equity market. The Shanghai Composite dropped nearly 1% on Monday.
Apple (AAPL - Get Report) and Cisco (CSCO - Get Report) shares were on watch after the companies agreed to partner in a deal which helps Apple move further into the enterprise market. As part of the collaboration, Apple devices will work more effectively on corporate networks utilizing Cisco technology.
The conclusion of the Federal Reserve's annual meeting in Jackson Hole, Wyo., caused uncertainty after no clues on a rate hike timeline were given.
"The key takeaway from the Jackson Hole symposium over the weekend was that FOMC members remained unwilling to telegraph any decision on the timing of the first rate hike," said Gennadiy Goldberg, U.S. strategist at TD Securities. "A cacophony of voices continued to hint that a 2015 hike could still remain in play, but the defense of earlier rate hikes was peppered with subjectivity as the inflation outlook remained stuck in the mud."
On Friday, Fed Vice Chairman Stanley Fischer kept noncommittal on when an interest rate hike could occur, but didn't rule out September.
Fischer noted to CNBC that "there was a pretty strong case" for a September hike but couldn't commit given there is still "a little over two weeks before we make a decision."
"We've got time to wait and see the incoming data and see what is going on now in the economy," he added.
The jobs report for August, to be released on Friday, will be crucial to any decision in September on rates Economists expect 223,000 jobs to have been added to nonfarm payrolls in the U.S. over the month compared to 215,000 jobs added in July. The unemployment rate is forecast to fall to 5.2% from 5.3%.
Business activity in the Chicago area grew in August, though at a slower pace than a month earlier. The Chicago PMI, released Monday, came in at 54.4 from 54.7. Economists had expected the measure to remain level at 54.7.
Markets closed out last week with gains despite massive volatility. Big swings had been characteristic of the week's trading with gains or losses of more than 1% from Monday to Thursday after fears of a slowdown in China's economy.
Source: TheStreet
