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the S&P 500 Index (SNPINDEX: ^ SPX) he’s had his best yo-yo impression in the last week. Today’s close was nearly 1.8% lower, yielding nearly 60 points after gaining 67 points, or 2%, yesterday. It is the fourth session in the last five trading days that the index, which accounts for about 80% of the total capitalization of the US stock market, gained or lost more than 1.75%.
This marks almost a week of high volatility that has mostly been on the downside. Since a record close of 3,580.84 on Sept. 2, the S&P 500 has lost nearly 7% of its value. Today’s sell-off, like most of the volatility we’ve seen this week, was broad, with the vast majority of the index’s 505 stocks ending lower. Several sectors saw all stocks fall on the day, and no sector had more winners than losers.
Image source: Getty Images.
The sectors most affected today are energy and technology. Nine of the 10 worst performing stocks today were oil stocks, with EOG Resources (NYSE: EOG), Apache Corp (NASDAQ: APA)and Occidental Petroleum (New York Stock Exchange: OXY) all falling 8% or more. Trillion dollar tech giants Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN)and Microsoft (NASDAQ: MSFT) all lost 2.8% or more today. The continued skidding has seen all three drop more than 10% from their highs this month.
Historically high unemployment weighs on stocks
Another week goes by with record levels of jobless claims. According to the US Department of Labor’s weekly unemployment report, another 884,000 people filed initial jobless claims last week. While this is well below the peak of nearly 7 million weekly claims for the first time set in late March, each week since then it would have broken the previous record.
Combine that with a persistently high unemployment rate and a falling labor force participation rate that is the lowest in more than four decades, and the US economy remains deeply in recession.
Initial US Unemployment Insurance Claims Data By YCharts
A combination of federal government actions at the start of the coronavirus pandemic, including financial support to families and businesses, along with monetary and interest rate stimulus from the Federal Reserve, has helped lead a booming recovery in stocks. from March lows.
Tech stocks in particular have led the rally, with companies like Microsoft and Amazon providing critical products and services that consumers and businesses have relied on to run, and Apple’s high-profit iPhone and related services businesses, they have held up remarkably well.
Over the past week, investors began to fidget, selling off big tech names and largely taking stocks as other sectors continue to struggle under the specter of an ongoing global pandemic that many fear could worsen as the summer turns into autumn.
Another hit to the oil patch brings oil stocks down
Crude oil prices fell 2.5% today, with the key US benchmark West Texas Intermediate at $ 37.06 per barrel after two weekly polls that reported an increase of more than 2 million barrels in crude oil in commercial warehousing in the US for the past week. Total oil inventories, including refined products such as gasoline and diesel, fell 3.4 million barrels last week, but the expectation was for a larger reduction that did not occur.
Refinery activity also declined as the industry moved from the peak summer demand season to the fall maintenance cycle. Compared to the prior-year period, the industry continues to grapple with a double-digit demand drop, with distillate and gasoline production down nearly 1.5 million barrels per day, year-over-year last week.
This is a bad news chase after last week’s injection of pain when Saudi Arabia launched its pricing power directly into the US oil market, sending crude prices back to $ 30. .
The news hit the energy sector hard: Energy Select Sector SPDR ETF (NEW: XLE), which invests in the 26 energy sector stocks of the S&P 500, fell 3.6% today. The sector is down almost 8% over the past week.
^ SPX Data by YCharts
Independent oil producers had the worst day, as these companies are most directly affected by weak demand and falling oil prices. Service companies like Halliburton (NYSE: HAL) and Schlumberger They are next in line, serving producers who are in much less demand in today’s environment. Both companies saw their shares fall 5% or more today.
Even refiners like it Oil marathon (NYSE: MPC) and Phillips 66 (NYSE: PSX), which are less exposed to low oil prices but still affected by weak demand, faced today, with their shares falling more than 4% in today’s sell-off.
While refineries and well-capitalized service providers shouldn’t have a problem weathering the oil recession, many producers face an economic environment in which they simply cannot survive. Without a pickup in demand, Saudi Arabia is not going to take its boot off the throat of every marginal producer out there. And that includes a lot of shale oil producers in the United States.
Seat belt
The first half of 2020 was one of the most volatile periods on record for stocks. And after a relatively quiet summer, the past week has brought a strong return to big changes, both up and down. It also provides a supercharged reminder that while stocks have proven to be amazing wealth builders in the long run, they can be brutally painful to own in the short term.
For wealthy working investors who will be counted on for their living expenses for years to come, that could prove disastrous; For investors looking to accumulate wealth to meet their needs in the future, this extreme volatility is what can lead to the best long-term returns.
Either way, investors should come to terms with, even embrace, the reality that volatility is likely to linger, especially with so much economic and political uncertainty driving people’s business decisions for weeks and months to come.
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