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The shares had one of their worst weeks of the year, with the Dow Jones Industrial Average losing 1,127 points, or 4.4%, to 24,285, its lowest level since July.
The blue-chip companies index was depressed by concerns about the economic outlook and the particular weakness of three components:
Apple
(symbol: AAPL), which dropped nearly 11% to $ 172.29;
Boeing
(BA), which was down 6.7% to $ 312.32; and
Goldman Sachs Group
(GS), down 6.4% to $ 189.10.
The S & P 500 fell 104 points, or 3.8%, to 2632, and the Nasdaq Composite was down 308 points, or 4.3%, to 6939. The Dow is down 1.8% since the beginning of the year, while the S & P 500 index fell 1.5%. The Nasdaq is one of the few US indices still in the dark for 2018, with a gain of 0.5%.
Oil prices continued their recent decline, with West Texas Intermediate crude dropping 7.8% Friday to $ 50.39 a barrel. It has now surpassed 34% of its October high of $ 76. Friday's sharp fall – which did not seem to reflect specific news in the energy markets – led to a 3% drop in energy stocks, as measured by the SPDR Energy Select Sector (XLE) Exchange Traded Fund. . He ended the week at a new low of 52 weeks and is down nearly 10% in 2018.
"There is some speculation about slowing demand for oil, but there have been no definitive data showing a supply / demand imbalance that would lead to such a drop in stocks," says Mark Stoeckle, manager of portfolio at Adams. Funds. His company
Adams Natural Resources
Closed-end funds fell 8% to $ 16 last week, a reduction of about 16% on the value of its net assets. It gives more than 4%. He favors
EOG Resources
(EOG) and
Western Oil
(OXY).
Oil markets are about to face an important OPEC meeting on Dec. 6, amid ongoing speculation about what Saudi Arabia could do to try to raise oil prices .
The major integrated oil companies of the United States,
Exxon Mobil
(XOM) and
Chevron
(CLC), both fell 4% last week, with Exxon ending at $ 75.49 and Chevron at $ 113.60. They both report about 4%. European Super Major
Royal Dutch Shell
(RDS.A) had dropped about 5% to $ 59, a new low in 52 weeks, and now reports more than 6% (before US source deductions). Most large energy companies are considered able to hedge their dividends from free cash flow as long as Brent crude, which now stands at $ 59, holds more than $ 50.
The shares could find support, as the S & P 500 index is now trading at its lowest valuation since the market fell in early 2016, according to Bloomberg data. The index is estimated at 16 times expected earnings from operations this year of approximately $ 163 and less than 15 times projected earnings for 2019 of $ 178. Investors are worried that the 2019 earnings forecast may not materialize due to the potential weakness of the global economy, but some reduction in growth is already expected in the market.
Another potential upside for equities is that investors are lowering their expectations about the magnitude of future interest rate hikes by the Federal Reserve. The market now offers an increase of one-quarter of its key key rate, currently between 2% and 2.25%, in December, and perhaps one more in 2019, compared to recent member expectations. from the Federal Open Market, which defines the policies. Committee of three quarter shots.
Poor homebuilding inventories may be starting to soften the Fed's restrictions, as the group has been strong lately, despite generally weaker sales and traffic data.
Brothers of toll
(TOL) gained 7% last week, at $ 32.60,
D.R. Horton
(DHI) was up 3% to $ 35.81, and
Lennar
(LEN) gained 4% to $ 42.74. Investors are attracted by stock prices as valuations are low and mortgage rates may fall next year. Toll and Lennar are trading around book value, and large builders are still very profitable, with P / E between 7 and 8, one of the lowest valuations of any industry.
Wall Street will focus on the meeting of President Donald Trump with Chinese President Xi Jinping at the G-20 meeting this week in Argentina, where the two leaders are expected to discuss trade issues.
In a conciliation move, Chinese antitrust regulators were laundered Friday
United Technologies
'(UTX) $ 23 billion purchase of
Rockwell Collins
(COLLAR). The approval, the final hurdle to the deal, led to a 9% gain in Rockwell shares on Friday at $ 141.63. The deal was seen as a hostage to trade tensions between the US and China, with investors actually giving it only 50% chance of being approved. United Technologies, which is expected to finalize the transaction in the coming week, rose 2.7% Friday to $ 129.04.
Write to Andrew Bary at [email protected]
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