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Sunday, January 24, 2021

Stocks are mostly lower in midday trade; oil price slips

NEW YORK (AP) — Stocks were in mostly lower in midday trading, dragged down by energy stocks, which fell along with the price of oil. Investors continue to weigh the implications of potential interest rate changes around the world, with the European Central Bank meeting tomorrow to discuss increasing its stimulus program and the Federal Reserve meeting in two weeks to most likely raise interest rates.

KEEPING SCORE: The Dow Jones industrial average fell 48 points, or 0.3 percent, to 17,841 as of 1:45 p.m. Eastern. The Standard & Poor’s 500 index lost nine points, or 0.4 percent, to 2,094 and the Nasdaq composite rose six points, or 0.1 percent, to 5,162.

US RATES: The consensus among investors is that the Fed will raise rates at its December meeting. That thesis was reinforced Wednesday, when Fe Chair Janet Yellen indicated that the U.S. economy is on track for an interest rate hike this month, though she was careful to point out that the Fed will need to review any upcoming data before making a final decision.

The data Yellen is referring to likely includes the November jobs report, which comes out Friday. Economists forecast that U.S. employers created 200,000 jobs last month and the unemployment rate remained steady at 5 percent.

“It’s becoming more and more likely that the Fed is going to rate rates,” said Kristina Hooper, Head of U.S. Investment Strategies at Allianz Global Investors.

Unless the November employment figures are extraordinarily weak, investors believe the Fed will raise interest rates this month, from record low levels, for the first time since the financial crisis. Some preliminary jobs data out Wednesday supported the prediction that the U.S. jobs market continued to improve last month. The payroll processor ADP said the private sector created 217,000 jobs in November.

EUROPE STIMULUS: In Europe, investors expect the European Central Bank will move in the opposite direction and expand its stimulus program when policymakers meet on Thursday, either by expanding its bond purchases or by cutting interest rates further. ECB head Mario Draghi signaled that action is coming this week as the bank seeks to support growth and push inflation higher.

ENERGY: Benchmark U.S. crude dropped $1.65, or 4 percent, to $40.19 a barrel on the New York Mercantile Exchange. The Energy Department reported Wednesday that U.S. crude inventories rose by 1.2 million barrels, while analysts had expected a decline. Brent crude, which is used to price international oils, fell $1.26 to $43.16 a barrel in London.

Oil and gas companies followed crude oil lower, making it by far the worst performing part of the market. Exxon Mobil fell $1.86, or 2 percent, to $80.03, Chevron lost $2.02, or 2 percent, to $90.47 and drilling rig operator Transocean fell 34 cents, or 2 percent, to $13.87.

CONNECTED: Mobile phone component maker Qualcomm jumped $2.75, or 6 percent, to $52.19 after the company announced a patent deal with a Chinese mobile phone maker.

TO THE AUCTION BLOCK? Yahoo jumped $2.20, or 6.5 percent, to $35.91 on reports that the company was considering selling its core internet businesses. Yahoo has struggled for many years to re-energize its business model. The company’s stake in Chinese e-commerce giant Alibaba, worth $30 billion, makes up the vast majority of Yahoo’s overall market cap of $33.6 billion.

BONDS, CURRENCIES: U.S. government bond prices fell noticeably after Yellen’s comments. The yield on the 10-year Treasury note rose to 2.20 percent from 2.15 percent late Tuesday. The U.S. dollar strengthened to 123.46 yen from 122.84 yen. The euro slipped to $1.0601 from $1.0631.

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