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US stocks drop lower as Oil falls back from highs

Summary:

  • US500 falls to weekly low after Wall Street open
  • Rising USD weighing on US indices
  • Oil drops sharply after Iranian comments

The US session for stocks has begun in negative territory with the uS500 falling to its lowest level of the week in the past hour. The benchmark began this week brightly with a gap higher, but has since fallen back with the most recent declines likely due, at least in part, to the rise in the US dollar. The greenback has rallied fairly strongly today both before and after the latest US retail sales release and a rising can be seen to have a negative impact on US exporters. 

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 The US500 has dropped fairly sharply in the last couple of hours as the USD has surged higher. Price is now back below the 2710 level and trades at its lowest level of the week. Source: xStation

Last year for the US500 was characterised by a very steady grind higher which saw low levels of volatility and not lots of trading opportunities besides buy and hold. So far in 2018 there has been a welcome pick-up in volatility, with the number of days where there as been a move of at least 1% in the S&P500 (US500 on xStation) already at its highest since 2009. 

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 There has been a notably higher level of volatility in the S&P500 this year and this could be seen to represent more trading opportunities. Source: WSJ Market Data Group

We pointed out yesterday that some of the best performing stocks have been related to Oil, with the surging price of crude providing a strong boost. However, in the last could of hours there’s been a bit of a swoon lower for Oil prices after comments out of Iran. According to Reuters the Iranian Nuclear Chief has said that the EU should make up for the US withdrawal from the nuclear deal or Tehran will enrich Uranium "stronger than before." A possible reason this has seen oil slide lower is that it suggests that perhaps the EU will be pressured into picking up some of the excess production when the US sanctions kick-in and the rise in USD is also having an adverse impact on the Oil price. 

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 Oil has taken a fairly sharp turn lower in recent hours and could be seen to indicate a souring of risk sentiment. Source: xStation

     

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