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donsutherland1 · 07-02-08, 04:15 PM

The Bear Market Begins…

As oil rose to new records, the Dow Jones Industrials fell to 11,215.51. That is its lowest close since the Dow closed at 11,097.87 on August 14, 2006.

To date, the Dow Jones Industrials has now fallen 20.8% from its October 2007 peak of 14,164.53. That exceeds the 20% (11,331.62) threshold required to usher in the start of a Bear market. In inflation-adjusted terms, the Dow is now 24.0% below its peak.

The S&P 500 closed at 1,261.52. That is its lowest close since July 24, 2006 when it closed at 1,260.91. To date, the S&P 500 has now fallen 19.4% from its October 2007 peak of 1,565.15. In inflation-adjusted terms, the S&P 500 is now 22.7% below its peak.

Despite the multitude of economic reports that were released today, including a strong factory orders report, the weekly petroleum data dominated, as I had thought it might. With respect to some of the major reports that could influence today’s trading, I noted last night:

Should U.S. inventories prove lower than expected, oil could be poised to make a run at both its intraday ($143.67 per barrel) and closing ($140.97 per barrel) records. Given the role the enormous rise in oil prices has played in undermining stock market sentiment, bad news on this front could push the Dow Jones Industrials toward or below its June 27 low.

The Energy Information Administration’s Weekly Petroleum Report likely loomed largest in setting the tone for stocks today. Following the report that showed a drop of 2,000,000 barrels in U.S. crude oil inventories for the week ended June 27. Those inventories are now at the lower boundary for their average range for this time of year.

The report also revealed a four-week average for crude oil imports that exceeded that for the same period last year despite the price of crude oil averaging 97.7% ($133.7165 per barrel vs. $67.6520 per barrel in 2007) higher than last year’s figure. Overall, the four-week average for gross crude oil imports of 10.092 million bbls/day was the highest figure since the four weeks ended May 9 when gross imports amounted to 10.204 million bbls/day. If such a trend persists, it could raise questions as to whether demand reduction in the U.S. is sufficient to make a material contribution toward near-term oil price relief. By day’s end, the price of crude oil settled at a record $143.57 per barrel after having reached a record of $143.91 per barrel shortly before the close of open outcry trading on the New York Mercantile Exchange. Shortly afterward, it reached $144.14 per barrel in after hours electronic trading. As oil surged to new records during the middle of the afternoon, a brief stock market rally was squashed and the major indices headed sharply lower.

In addition, as the day wore on, there was growing speculation as to the hawkishness of the European Central Bank’s statement explaining a widely anticipated 25 basis point hike in interest rates. In response, the U.S. dollar steadily retreated against the Euro. A weakening dollar exacerbated the climb in crude oil prices, as the price of oil is denominated in dollars.

07-02-08, 04:15 PM	#26 (permalink)
donsutherland1 Moderator Mod team member Join Date: Oct 2007 Last Online: Today 12:29 PM Location: New York Posts: 2,467 Thanks: 814 Thanked 1,572 Times in 877 Posts Lean: Centrist Gender: Awards:	Re: U.S. Stocks Tumble: Some Comparisons from Past Recessions The Bear Market Begins… As oil rose to new records, the Dow Jones Industrials fell to 11,215.51. That is its lowest close since the Dow closed at 11,097.87 on August 14, 2006. To date, the Dow Jones Industrials has now fallen 20.8% from its October 2007 peak of 14,164.53. That exceeds the 20% (11,331.62) threshold required to usher in the start of a Bear market. In inflation-adjusted terms, the Dow is now 24.0% below its peak. The S&P 500 closed at 1,261.52. That is its lowest close since July 24, 2006 when it closed at 1,260.91. To date, the S&P 500 has now fallen 19.4% from its October 2007 peak of 1,565.15. In inflation-adjusted terms, the S&P 500 is now 22.7% below its peak. Despite the multitude of economic reports that were released today, including a strong factory orders report, the weekly petroleum data dominated, as I had thought it might. With respect to some of the major reports that could influence today’s trading, I noted last night: Should U.S. inventories prove lower than expected, oil could be poised to make a run at both its intraday ($143.67 per barrel) and closing ($140.97 per barrel) records. Given the role the enormous rise in oil prices has played in undermining stock market sentiment, bad news on this front could push the Dow Jones Industrials toward or below its June 27 low. The Energy Information Administration’s Weekly Petroleum Report likely loomed largest in setting the tone for stocks today. Following the report that showed a drop of 2,000,000 barrels in U.S. crude oil inventories for the week ended June 27. Those inventories are now at the lower boundary for their average range for this time of year. The report also revealed a four-week average for crude oil imports that exceeded that for the same period last year despite the price of crude oil averaging 97.7% ($133.7165 per barrel vs. $67.6520 per barrel in 2007) higher than last year’s figure. Overall, the four-week average for gross crude oil imports of 10.092 million bbls/day was the highest figure since the four weeks ended May 9 when gross imports amounted to 10.204 million bbls/day. If such a trend persists, it could raise questions as to whether demand reduction in the U.S. is sufficient to make a material contribution toward near-term oil price relief. By day’s end, the price of crude oil settled at a record $143.57 per barrel after having reached a record of $143.91 per barrel shortly before the close of open outcry trading on the New York Mercantile Exchange. Shortly afterward, it reached $144.14 per barrel in after hours electronic trading. As oil surged to new records during the middle of the afternoon, a brief stock market rally was squashed and the major indices headed sharply lower. In addition, as the day wore on, there was growing speculation as to the hawkishness of the European Central Bank’s statement explaining a widely anticipated 25 basis point hike in interest rates. In response, the U.S. dollar steadily retreated against the Euro. A weakening dollar exacerbated the climb in crude oil prices, as the price of oil is denominated in dollars.