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HOW WE GOT HERE
You may be getting tired of hearing this, but the oil and stock markets are rather tightly coiled these days. Wednesday was another example.
U.S. stocks rose in the afternoon, after plunging pretty sharply in the morning, following a similar turnaround for Nymex crude oil, which managed the feat despite the latest stockpiles report showing yet another record build.
There were other headwinds as well. New home sales fell sharply in January, and the president of the Richmond Fed, Jeffrey Lacker, said the choice to raise interest rates this year is still “the logical one.” Moreover, hopes are fading for a grand bargain at next week’s meting of G20 finance minsters and central bankers. In forex trading, the U.K. pound hit a seven-year low amid the “Brexit” debate.
That backdrop had the bulls on the defensive, but the selling didn’t last. Both crude oil and stocks were down sharply in the morning, and while their turnarounds weren’t identical, they were very close. Oil bottomed out at 9:30 a.m. The S&P 500 bottomed out at 10:30. Crude oil started rising sharply around 11:18 a.m. The S&P 500 also started rising around 11:18 a.m.
This year has seen a sharp increase in the number of days that stocks and oil move in the same direction, data from LPL Financial shows. The firm looked at the market going back to 1983, and found that crude and stocks moved in the same direction 51% of the time – essentially a coin flip. This year, though, that percentage has jumped to 74.3%, “the highest correlation we’ve seen since 1983,” the firm said.
Data Front: January durable goods report (8:30 a.m. ET), weekly jobsless claims (8:30), FHFA housing price index (9:00), EIA natural gas report (10:30).
Fedpseak: Dennis Lockhart (8:15), Kansas City Fed manufacturing index (11:00), John Williams (12:00 p.m.), Fed balance sheet (4:30).
IPOs: Mapi-Pharma, 3.1 million shares, $15-$17; Cancer Prevention Pharmaceuticals, 1.9 million shares, $12-$14.
International: Germany: GfK consumer survey (2:00 a.m. ET); UK: GDP (4:30); Italy: retail sales (5:00); Japan: consumer prices (6:30 p.m.)
Author and former banker Satyajit Das discusses the factors that led to a sluggish global economy and the ways in which economic growth can be sustainable — all highlighted in his latest book, “The Age of Stagnation: Why Perpetual Growth is Unattainable and the Global Economy is in Peril.”
Stock Pare Losses After Morning Rout U.S. stocks pared losses Wednesday, though a decline in financial stocks continued to weigh on major indexes.
Why a Global Currency Accord Won’t Happen Currency chaos of late is reminiscent of the violent moves of the mid-1980s, and it has revived hopes for the sort of coordinated intervention used back then to tame them. It’s not going to happen, WSJ chief economics commentator Greg Ip writes.
Cutbacks by Midwest Refiners Pose Fresh Risk for Hard-Hit Oil Market Refineries in the U.S. Midwest are losing their thirst for oil, posing a new risk for the battered oil market.
China Corporate Debt Surges, Fueling Economic Concerns A surge of corporate bonds is adding to China’s already-high debt levels, amplifying risks to the economy as Beijing persistently encourages borrowing to fuel growth.
Putin Makes Diplomatic Push Amid Doubts on Syria Cease-Fire Russian President Vladimir Putin made a diplomatic push Wednesday to build support for a cease-fire in Syria, two days after Moscow and Washington agreed to a deal that has prompted skepticism about Russia’s intentions.
Investors Look to Bookies to Gauge If UK Will Leave the EU Fund managers gauging the likelihood of the U.K. leaving the European Union in a June referendum are largely overlooking political polls and instead scrutinizing betting markets.
Bank-Stock Bloodbath: The Cycle Financials Can’t Escape What is making things so bad for banks? In many ways they are trapped in an adverse feedback cycle that has been made worse by a fall this week in a key proxy for bank profitability.
Oil Executives: We Will Survive Many energy executives gathered in Houston for an industry conference said they were confident their companies would pull through the current period of low oil prices.
Funds Clobbered by Rout in Financial Stocks Heavy weightings in poor-performing financial stocks are weighing down some mutual funds so far this year. But some fund managers say the selling is overdone, and it is merely a matter of time until their undervalued gems shine.
How Islamic State’s Secret Banking Network Prospers More than a year of U.S.-led airstrikes and financial sanctions haven’t stopped Islamic State from ordering supplies for its fighters, importing food for its subjects or making quick profits in currency arbitrage.
LG Electronics Senses Breakout Moment With G5 Smartphone After several years spent lost in the shuffle of Android handset makers, LG Electronics Inc. is giving up on the China market and is making a renewed push in the U.S. with a high-end flagship smartphone, in a bid to regain the world’s No. 3 spot.
CHART OF THE DAY