In my Saturday Night Quarterback post last weekend, I said that I was looking for Microsoft’s (MSFT) earnings, reported after the close yesterday, July 20, for clues on how the U.S. stock market would react to earnings reports from Alphabet (GOOG) on July 24, Facebook (FB) on July 26, and Amazon (AMZN) on July 27.
Today it’s JPMorgan Chase CEO Jamie Dimon telling a conference that the unwinding of central bank bond-buying programs is an unprecedented challenge that may be more disruptive than people think. Tomorrow it’s Federal Reserve chair Janet Yellen giving Congress some clue (maybe) on when the Fed will begin to reduce its $4.5 trillion portfolio of Treasury and mortgage-backed debt instruments.
Hedge funds and other money managers have cut their long positions on crude futures to the lowest level since November for the week ended on June 20. At the same time short positions, which are bets that oil prices will fall further,  have climbed to near record highs. The ratio of long positions to short positions has fallen to around 2-to-1 from a high of 12-to-1 in February. This all suggests that we’re at something like a short-term bottom in the price of oil.
A month ago when OPEC extended its production cuts to to the end of 2017, Saudi Arabia promised to do “whatever it takes” to stabilize oil prices? Now it’s not at all clear what the Saudi’s can do.The dual problem is rising production from countries outside the OPEC agreement and rising U.S. production.
Today’s moves take oil to a 7-month low. And oil is now in an official bear market for 2017 with West Texas Intermediate down 20% from its February 23, 2017 high at $54.45 a barrel. Why the tumble?
Anyone who bought technology stocks on the dip last Friday and Monday is feeling unhappy today. And that spells a worried market. Especially since key stocks in the sector such as Apple (AAPL) and Amazon (AMZN) are showing signs of breaking through important support. The NASDAQ Composite Index is off 0.93% today as of 12:30 p.m. New York time.
OPEC and allied non-OPEC producers have agreed to extend oil production cuts at current levels for nine more months through March 2018. Oil markets, which had been expecting exactly this result for days now, fell on disappointment that OPEC didn’t go further and increase the size of production cuts.
