Oil stocks in a recession
Yesterday I discussed the overwhelming importance of oil and its implications for your investments.
My most important advice in yesterday's issue was buried down at the bottom, so you might have missed it. Here it is to recap:
"if I can leave you with one thing to keep in mind, it's to remember the importance of oil - even for non-commodity investments. You need to look at all of your investments, from stocks even down to bonds and savings accounts, and think about how oil price fluctuations could affect the bottom line of the underlying assets and businesses you're invested in."
I also promised that I would look into some specific oil investments to buy under the assumption that the recession has resumed or is on the horizon.
During a recession, oil prices tend to sag due to decreased demand for oil, which doesn't usually bode well for most types of oil companies.
Teekay Tankers, A Power Energy Generation Systems and BNC Bancorp lead small-cap percentage losers
Also included among the results: Chindex International Inc. (Nasdaq:CHDX), Alyst Acquisition Corp. (Nasdaq:AYA), Citi Trends Inc. (Nasdaq:CTRN), Valhi Inc. (Nasdaq:VHI), Matrixx Initiatives (Nasdaq:MTXX) and Pzena Investment Management Inc. (Nasdaq:PZN).
H&E Equipment Services, ManTech International and First Bancorp lead small-cap percentage losers
Also included among the results: United America Indemnity Ltd. (Nasdaq:INDM), Pharmasset Inc. (Nasdaq:VRUS), Telvent GIT SA (Nasdaq:TLVT), Bankrate Inc. (Nasdaq:RATE), Teekay Tankers Ltd. (Nasdaq:TNK) and NACCO Industries Inc. (Nasdaq:NC).
December starts out dreary for small-cap stocks; MNT, QI, and GGP lead gainers
Today's Market Watch highlights included:
• From a money flow perspective, investors appeared to be fleeing stocks for safe-haven outlets in the credit markets.
• The dollar was up about 0.5% against the euro, which also weighed on commodity prices.
• Energy stocks were also an early drag on the market, taking a cue from sinking crude oil prices, which were down $4 this morning.
• The construction spending report was pegged at minus 1.2%, also below the projection for a dip of 0.9%.
Small Cap Gainers:
• Johnson & Johnson to buy Mentor Corp., which is leaping about 90% in pre-market. See (NYSE:MNT).
• Qimonda up about 30% in pre-market, reports progress on partner talks, delays results. See (NYSE:QI).
• General Growth pops 34% in pre-market after receiving loan extension. See (NYSE:GGP).
Small Cap Losers:
• Union Drilling Inc. is off 22% as the natural gas driller tumbled with other energy names such as Patriot Coal Corp, down 14%. See (Nasdaq:UDRL) and (NYSE:PCX).
• Teekay Tankers Ltd. is down 12%, correcting lower after a huge rally day Friday. See (NYSE:TNK).
• Solarfun Power Holdings down over 8% in pre-market as energy, solar stocks are all seeing steep declines before the bell. See (Nasdaq:SOLF).
• UAL Corp. is down 6% after the airline filed a mixed shelf to offer securities. See (Nasdaq:UAUA).
Huge opening rout as manufacturing shudders worldwide
Small-cap stocks started out the new month with a bearish bang, sinking hard amid gloomy manufacturing data around the world, which weighed on industrial and commodity stocks. At 10:03 a.m. ET, the Russell 2000 (NYSE:IWM) was down 23.79, or 5.03%, at 449.35.
The dour tone on manufacturing started in Asia, where new orders for China’s manufacturing sector fell hard, stirring worries about the global recession. Then, the worries followed through to Europe and finally here to the United States, as the ISM Manufacturing Survey came in at 36.2, which was below the forecast of 38.0. In addition, the construction spending report was pegged at minus 1.2%, also below the projection for a dip of 0.9%.
Energy stocks were also an early drag on the market, taking a cue from sinking crude oil prices. The market for “black gold” was off nearly $4 a barrel this morning, pummeled by news that OPEC said they would wait to make a decision on further supply cuts and also by the troubling economic news around the globe.
The dollar was up about 0.5% against the euro, which also weighed on commodity prices this morning. Copper and aluminum prices were lower in Asian trading as those markets react to the China manufacturing news. Within the commodity realm, Brazilian stocks were off some 3% early today, as that country is heavily dependent on commodity exports.
Investors will be looking for news about how the holiday shopping season is moving along. The early returns seem positive for the “Black Friday” kickoff of the season after last Thursday’s Thanksgiving Day holiday, but the way the market is trading today suggests there might be some hidden weakness in those returns. Today is known as “Cyber Monday” as consumers scan the Internet for holiday bargains, and any feel for those returns could also be important as the day progresses.
From a money flow perspective, investors appeared to be fleeing stocks for safe-haven outlets in the credit markets. European bund futures hit contract highs . . .
