Stuck in Place. Stocks slipped Friday, with all three major indexes closing slightly in the red. Investors are sitting tight as events in the next two weeks could move the market. The Federal Open Market Committee is meeting next Tuesday and Wednesday to discuss the latest monetary policy after May’s market selloff. The G-20 meeting later this month could see President Donald Trump and Chinese President Xi Jinping talk about trade again. A dovish tone from the Fed or progress in the trade negotiations could jump start the market. In today’s After the Bell, we…
- wonder where oil price might go from here;
- look at May’s solid growth in U.S. consumer sales and industrial output;
- and check on China’s latest sign of weakness.
The Crude Puzzle
The three major U.S. indexes all closed with losses on Friday ahead of the closely watched Fed meeting next week. The Dow Jones Industrial Average slipped 17.16 points, or 0.07%, to close at 26089.61. The S&P 500 fell 4.66 points, or 0.16%, to end at 2886.98, and the Nasdaq Composite tumbled 40.47 points, or 0.52%, to close at 7796.66.
Oil remains in focus following the tanker attacks in the Gulf of Oman yesterday. Brent crude, the global benchmark, rose 1.14% to $62.01, and West Texas Intermediate was up 0.44% to $52.51. Still, both benchmarks are down more than 2% for the week.
The International Energy Agency (IEA) slashed its estimate for global oil-demand growth on Friday by 100,000 barrels per day to 1.2 million, blaming the weakening economic sentiment, deteriorating trade outlook, warm winter in Japan, slowdown in European petrochemical industry, and softer gasoline and diesel demand in the U.S.
Pressure on supply persists, such as U.S. sanctions on Iran and Venezuela, an agreement to reduce output by the Organization of the Petroleum Exporting Countries (OPEC) and allies, and the latest attacks on tankers in the Gulf of Oman. But IEA thinks the impact will be limited, as non-OPEC supply growth—lead by the U.S.—should be able to offset the production loss and meet the global demand.
Despite the lowered estimate for oil demand, the agency believes that global governments’ stimulus packages and the robust consumption in the developing world should support the demand going forward, which should pick up to 1.6 million barrels per day in the second half of the year.
U.S. industrial production rose 0.4% in May, registering the strongest monthly rise in six months. Retail sales also rose by 0.5% from the previous month, beating expectations of a 0.2% increase. “Despite some signs of erosion in confidence in recent months, solid retail sales results last month provide some reassurance that despite the slowing economy and weakening sentiment, the consumer isn’t dead,” wrote Jim Baird of Plante Moran Financial Advisors in a Friday note.
Things aren’t that rosy on the other side of the earth, as China’s industrial production–rising 5.0% from the year-ago period–posted the slowest growth in more than 17 years. Although the trade dispute with the U.S. has held investor attention as of late, it’s not been the main driver of China’s recent weakness, wrote Michael Shaoul of Marketfield Asset Management.
While real estate and retail sales remained strong, the weakness was largely driven by China’s domestic automobile market, which saw production fall 4.7% from the previous month. “Based on experiences elsewhere it will take time to turn this situation around, and activity might not return to its 2017/18 boom level for a number of years,” wrote Shaoul.
The Hot Stock
Facebook stock (FB) rose 2.2% to close at $181.33 on news that its cryptocurrency plans received funding from big names including Visa (V), Mastercard (MA), PayPal Holdings (PYPL), and Uber Technologies (UBER).
The Biggest Loser
Write to Evie Liu at firstname.lastname@example.org