Energy stocks slide with oil overnight

By Margreet Dietz

Traders Michael Smyth, left, and Eugene Mauro, right, work on the floor of the New York Stock Exchange. Photo / AP
Traders Michael Smyth, left, and Eugene Mauro, right, work on the floor of the New York Stock Exchange. Photo / AP

Wall Street was mixed to start its week, with energy stocks falling alongside a drop in the price of oil.

US crude fell below US$40 a barrel for the first time since April, amid renewed concern about a global glut.

"It's stop-loss technical selling combined with sheer liquidation by those fearing we'll soon be swimming in oil again," Phil Davis, trader at PSW Investments in San Diego, California, told Reuters. "We've had crude builds during the summer, when we were supposed to be having runaway draws from record driving."

Wall Street fluctuated. In 2.59pm trading in New York, the Dow Jones Industrial Average fell 0.2 per cent. The Nasdaq Composite Index rose 0.4 per cent. In 2.44pm trading, the Standard & Poor's 500 Index declined 0.2 per cent.

In the Dow, declines in shares of Exxon Mobil and those of Chevron, down 3.3 per cent each, outweighed gains in shares of Apple and those of Pfizer, recently up 1.5 per cent and 1.3 per cent respectively.

Following Friday's report showing weaker-than-expected US economic growth in the second quarter, separate reports showed that manufacturing grew at a slower pace in July while construction spending unexpectedly declined in June.

The Institute for Supply Management's index fell to 52.6, down from 53.2 a month earlier.

A Commerce Department report showed construction spending slid 0.6 per cent to a one-year low, following a 0.1 per cent decline in May.

"The assumptions for June construction spending plugged into the advance GDP estimate were optimistic," Ted Wieseman, an economist at Morgan Stanley in New York, told Reuters. "The government hasn't released all of their assumptions yet, but these figures look consistent with second-quarter GDP growth being revised down to 1.1 per cent or 1.0 per cent."

In fresh deal news, shares of SolarCity sank, trading 7.9 per cent weaker as of 3.21pm in New York, after Tesla agreed to buy the company for about US$2.6 billion, less than previously proposed. Tesla shares traded 2 per cent weaker.

"I'm not sure it's a great deal for Tesla shareholders," Maryann Keller, a former Wall Street analyst who is now an auto industry consultant in Stamford, Connecticut, told Bloomberg. Tesla Chairman Elon "Musk can probably sell it based on his cult of personality. The true believers will buy into it."

In Europe, the Stoxx 600 Index finished the day with a slide of 0.6 per cent from the previous close. Germany's DAX index slipped 0.1 per cent, the UK's FTSE 100 index dropped 0.5 per cent, while France's CAC 40 index shed 0.7 per cent.

Investors were wary about the results of so-called stress tests by European regulators, announced last Friday after the market closed. The results showed that the region's banks overall are on a steadier footing.

"Investors are sceptical about everything these days," Peter Garnry, head of equity strategy at Saxo Bank in Hellerup, Denmark, told Bloomberg. "The problem with the stress tests is that they were too soft, only assuming a mild to moderate recession. This means that the data doesn't tell us much, and it's not too surprising that most banks passed. What could drive markets higher from here is any sign that the global economy is picking up."

- BusinessDesk

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