Last week’s action sparked the idea that economically sensitive cyclists are ready to take the baton.
Technology (+3.6) far outperformed the performance in the five sessions, and served as a replacement defensive play on days when market direction shifted.
In Cycling, Energy (-5.7%), Finances (-3.5%) and Industrials (-1.4%) all struggles. The exception was Consumer Discretionary (+ 1.8%). But that could now be fairly divided into two sectors, with Amazon, big box retailers, homebuilders and delivery restaurants in one camp and cruise lines, casinos and department stores in the other.
Of the cyclical drips is the energy sector (NYSEARCA: XLE) brings most concerns to mind as it was the worst performer in a week when futures were on crude oil (CL1: COM) were not much changed and US Oil (NYSEARCA: USO) used to be off just 0.5%.
News for raw was mixed. OPEC + has almost addressed its production ban last month, but a draft OPEC + statement said a second wave of COVID-19 poses a major risk to an oil recovery.
U.S. oil inventories fell less than expected last week.
Among the subsectors is the Invesco Dynamic Energy Exploration & Production ETF (NYSEARCA: PXE) fell 8.7%, the ETF of Invesco Dynamic Oil & Gas Services (NYSEARCA: PXJ) 10.8% lost and the VanEck Vectors Unconventional Oil & Gas ETF (NYSEARCA: FRAK) slow 8%.
Those seem to be dropping large drops for a week when raw just reached around $ 40 / barrel, as it has been doing since the beginning of June. But they can be guaranteed if energy companies start accepting $ 40 raw as the foreseeable new normal.
The first jump in the oil paint counts since February, according to Baker Hughes numbers from Friday, showing some comfort on the part of players to start pumping at these prices.
More months of $ 40 oil would mean lower profits and cut any incentive for investors to price in oil and gas stocks for future demand of growth.
There is also the concern that even the $ 40 level through the year is not sustainable because it requires a large reduction in OPEC + production. Countries can resist if post-pandemic budgets become more constrained. Russia has always been insane on austerity measures and Saudi Arabia, although willing to support prices, has shown that it is also ready to accept Russia with a price war if necessary.
Saudi Arabia has already dropped exports to a record low, sending just 4.98M bpd in June.
Saudi oil exports fall
Under the Radar
When U.S. investors fired some retailers, Target, and others castigated, Kohl Kohl’s, one of the UK’s largest chains chills through the European retail sector.
Marks & Spencer (OTCQX: MAKSF) will cut 7,000 jobs over the next three months after clothing sales crater.
“As previously outlined, Clothing & Home in-store sales remain well below last year, with online and home delivery strong,” the company said. “It is clear that there has been a material shift in trade and although it is too early to carefully predict where a new post Covid sales mix will settle, we need to act now to reflect this change.”
