With global markets and U.S. equities in selloff mode the past two days, Treasury prices have rallied, shoving yields sharply lower.
The major U.S. stock benchmarks fell for the fifth consecutive day as oil prices resumed their slide and the Swiss central bank unexpectedly lifted a three-year cap Euro exchange rates put in place to keep the Franc from appreciating too much and damaging Switzerland’s export-driven economy. Adding to the volatility was a surprise rise in weekly jobless claims to a four-month high at 316,000 and a series of disappointing quarterly earnings reports from the financial sector including Bank of America and Citigroup.
The major U.S. stock benchmarks retreated as crude oil sank to new five and a half year lows after finding some stability last week. Volatility returned to the markets with the CBOE VIX index crossing 20 during the session before falling back slightly to close at 19.6 up 11.68%.
U.S. stocks soared for the second day turning the major averages positive for 2015 as oil seemingly found support after a second day of gains. While initial jobless claims of 294 thousand was slightly above economist expectations, it remained below the 300 thousand mark while Wednesday’s Fed comments indicating a patient approach to interest rate hikes continued to buoy the markets.
Stocks recovered a good deal of ground after a multi-day beat down as crude oil prices saw gains and the Fed notes indicated some patience with the approach to raising rates. Stocks got another boost from a positive ADP jobs report which showed the economy added 241,000 jobs in December beating economist estimates of 226,000.
Stocks were down across the board in a broad market selloff fueled by the continuing decline of crude oil prices. The Energy sector led the dive falling by nearly 4% as crude oil fell to nearly six year lows. Adding to the bearish sentiment, Greek Prime Minister Antonis Samaras warned of a possible Greek default and exit of the EU as that country heads into elections in three weeks. The European markets saw large declines and the Euro fell to nine year lows against the Dollar.
Stocks were positive all throughout the session ahead of the FOMC meeting and oil prices found some consistency. The markets extended those gains further following the Fed’s announcement that while economic activity is expanding, it could remain patient in enacting interest rate hikes and planned to keep rates at market friendly low levels for a ‘considerable’ time.
Crude oil continued its slide overnight and a surprise interest rate hike by Russia in an effort to stabilize the falling Rouble which has been hard pressed in the wake of oil’s recent losses, had the U.S. markets poised for another down day. Oil reversed course in the late morning bouncing the equity markets off their lows and even into positive territory before sentiment turned negative again driving the markets to a lower close.
Oil’s early session gains had stocks set for a positive move but a volatile reversal of Crude sent stocks into the red as the hostage crisis in Sydney Australia and an unexpected contraction of the Empire State Manufacturing Index turned investor sentiment negative.
It was red across the board as oil prices continued to fall after crude stockpiles, which according to the EIA were expected to fall by 2.7 million barrels, instead posted a surprise gain of 1.45 million barrels. Combined with OPEC’s cut in its 2015 demand forecast, oil prices fell to five year lows and dragged all ten equity sectors to losses as well with the S&P 500 Energy sector being the hardest hit down 3.08%.