Energy Stocks Lead The Week Thanks To Rising Crude And Heating Oil Prices

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key takeaways:

  • Employment status report reveals lower-than-expected jobs added in December
  • Energy and financial stocks outperform on rising oil prices and yields
  • Protest movements between major indices could lead to volatility in the market
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The employment status report was released on Friday and was weaker than expected; The economy added about half of the predicted jobs. The Omicron version as part of the great resignation and the recent trend of self-employment can be attributed to the small number. However, the unemployment rate fell from 4.1% to 3.9%, partially aided by an increase in the participation rate. Equity index futures declined marginally on the news.

Some of the stocks that were moving in premarket action include GameStop . were involved
GME
(GME), which was trading up 14.48% on the news that the company was launching a division to develop a market for NFTs or non-fungible tokens. Additionally, the company plans to establish partnerships for cryptocurrencies. The plans are part of an overall vision for turning GameStop around.

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acuity brand
ay
(AYI) rose more than 4% in premarket trading after reporting that the company beat earnings and revenue estimates. The electronics company saw strength in its lighting and lighting control sales despite supply chain challenges.

Of course, not all stocks are rising; Starbucks (SBUX) fell 2% in premarket trading after being downgraded by RBC Capital and Oppenheimer. Analysts cited near-term growth concerns.

Bitcoin continued its decline on Friday morning, dropping another 3.21%. The cryptocurrency is down more than 11% in the past five days and is down almost 38% from its November 2021 highs.

On Thursday, the major indices closed lower with the S&P 500 (SPX) testing the 50-day moving average. Growth stocks fell in the morning session on a further hike in interest rates, but bargain buyers appeared later in the day, pushing many growth stocks below their lows. Despite the bottom of the major indices, the NYSE’s advance actually outpaced the decline by about 1.25 to 1. Additionally, the Cboe Market Volatility Index (VIX) fell 0.61%. These can be important undercurrents to keep an eye on.

Packaged food company Lamb Weston (LW) led the S&P 500, rising 9.32% after announcing better-than-expected earnings and revenue. It was followed by California-based bank SVB Financial Group (SIVB), which grew 6.76%, and was followed by security software company NortonLifeLock (NLOK).
nlok
), which grew by 4.66%.

Once again, the energy sector led all other sectors and saw a 2.31% rally in crude oil prices (/cl), a 1.41% rise in heating oil prices (/HO), and a 0.66% rise in RBOB gasoline prices. The growth helped. /rb). The Energy Select Sector Index ($IXE) gained 2.24%, setting a new 52-week high. Energy may continue to lead as oil prices continue to rise in premarket trading, climbing over $80 on its 1% rally on Friday. However, the energy index is now testing some 2019 highs which could act as resistance.

Financial stocks were the second most popular sector, resulting in the Financial Select Sector Index ($IXM) rising 1.55% and closing at a new 52-week high. Financial stocks were helped by a 1.64% rise in the 10-year Treasury yield (TNX). The 10-year yield has risen by more than 14% in the past four days and nearly 30% from its December lows. However, the 10-year yield is also testing its historical high since March 2021, which could slow the rally.

market discount

With oil prices and 10-year yields reaching historic highs, rallies in energy and financial stocks may come to a halt and investors may have a chance to digest the effects of higher oil prices and higher interest rates. Charles Dow, who, along with Edward Jones and Charles Bergstrasser, founded Dow Jones & Company, Inc. in 1896. Founded, created the Dow Jones Industrial Average ($DJI) and developed a theory that “the market discounts everything”. This means that the collective knowledge and wisdom of all participants is reflected in the price of the index or stock. This is similar to the efficient market hypothesis which states that stock prices reflect all known information.

While liquid markets are efficient, they can take time to discount new information because many money managers have a lot of money, and it takes time to move capital. On Wednesday, we learned that the Fed was a lot more bullish than many investors originally thought. We saw many stocks fall as the initial reaction was bearish. However, as time goes on, we’ll see other investors “vote” by either buying down stocks or focusing on investments that benefit from the new information.

The “votes” of buyers and sellers form an important process called price discovery. Price discovery often comes with increased volatility because too many participants have a lot of money and very strong opinions. Investors who are willing to witness these changes can find opportunities.

Resistors in Parallel: Markets move more smoothly when indices generally move in the same direction. However, the S&P 500 (SPX) and Dow Jones Industrial Average ($DJI) recently broke support, which my technical analysis friends tell me bulls are losing. However, Nasdaq
NDAQ
Composite (COMP:GIDS) is testing support, which could turn bullish if the price bounces back. The Russell 2000 (RUT) is between support and resistance and has been around for about a year, so the bulls and bears haven’t really made a commitment to one direction.

What we are seeing here is the S&P 500 and the Dow will be under bearish pressure, while the Nasdaq could see bullish pressure. This is likely to cause volatility in the market. Additionally, because the Nasdaq has already shown more weakness, it could actually break support if the S&P 500 and Dow swing lower.

Alternating Currents: While almost always a company or two announces earnings week-by-week, unofficial earnings season begins the following week. Earnings can help provide essential information that investors are seeking when determining what to buy and what to sell. It’s a flood of information that the markets have to discount.

Earnings season begins with major financial companies and banks. This can be very interesting as we have already seen financial stocks move significantly on rising yields.

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