US stocks close lower amid surging oil prices and slowing economic growth forecasts

  • Oct 12, 2021
  • Proactive Investors

US stocks closed lower amid surging oil prices and concerns about slowing US economic growth.

US oil benchmark WTI crude oil topped $82 a barrel at its session highs before trading around $80 Monday as Goldman Sachs (NYSE:GS) cuts its US economic growth forecast for 2022 to 4% from 4.4% and its 2021 estimate to 5.6% from 5.7%.

One the day, the Dow Jones Industrial Average dropped by 250 points, or 0.72%, to 34,494, while the S&P 500 fell 0.69% to 4,361.

And the tech-heavy Nasdaq declined 0.64% to 14,486.

US stocks rose on Monday afternoon as a rally in crude oil and natural gas boosted the shares of energy companies.

The Dow Jones Industrial Average rose 0.1% to 34,750.38 in afternoon trading.

The S&P 500 gained 0.5% while the technology-focused Nasdaq Composite also rose 0.3%.

Shares of oil companies rose, as energy and materials were the best-performing sectors of the S&P 500. Occidental Petroleum rose 1.6%, while Marathon Oil gained 1.3%.

"After a tough morning for European markets, Wall Street has buoyed global risk appetite with a positive, if still modest, move that has recouped some of Friday’s losses," said Chris Beauchamp, Chief Market Analyst at IG, a global leader in online trading.

"Fed minutes and the start of earnings season, plus more inflation data throughout the week, provide plenty of reason for caution, but at least the debt ceiling issue has been taken off the table for the time being."

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US benchmarks started mixed on Monday as tech fell but energy stocks did well on the back of crude price rises while the US bond market was closed for Columbus Day.

In New York, the Dow Jones Industrial Average added around 15 points at 34,761.

The broader S&P 500 lost around 2.5 points at 4,388. The tech-laden Nasdaq shed around 12 at 14,567.

US benchmark crude, West Texas Intermediate (WTI), added over 2.2% at US$81.05 a barrel on the day as the global energy price rise continues. Enphase Energy was among one of the biggest risers on S&P 500, gushing over 5% higher at US$162.22 a share. Chevron Corp also added 0.39% on the day.

Meanwhile, Facebook shares lost 0.38% while Amazon slipped 0.25%.

This week sees the major banks release third-quarter earnings, starting with JPMorgan on Wednesday, with Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Morgan Stanley (NYSE:MS), Wells Fargo and Citigroup following later in the week.

US stocks are expected to start the week on the back foot as traders look to upcoming earnings reports for direction.

Futures for the Dow Jones Industrial Average futures fell 0.22% in Monday pre-market trading, while the broader S&P 500 index declined 0.48% and those for the tech-heavy Nasdaq 100 shed 0.95%.

Stocks closed lower on Friday after the monthly non-farm payrolls report revealed that the US economy created 194,000 jobs in September, well below the 500,000 expected.

The Dow closed 9 points lower at 34,746, while the S&P 500 gave back 8 points to 4,391 and the tech-heavy Nasdaq slipped 76 points, or 0.51%, to 14,580.

“Investors have high expectations for 'Corporate America' and as we learned from the last earnings season, profits and revenues need to beat by considerable margins for the rally to resume,” said Hussein Sayed, chief market strategist at Exinity.

This week, big banks will kick off the earnings season with JP Morgan, Bank of America (NYSE:BAC), Citigroup, Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) all announcing results.

“Overall, earnings are estimated to grow 27.6% for S&P 500 companies but we should expect growth to be well above 30% given the positive surprises,” Sayed added.

“That should lower current valuations and indicate that growth in profitability is taking the driving seat rather than higher valuations when it comes to equity prices.”