STOCKS RALLY ON REDUCED MIDEAST TENSIONS -- OIL DROPS SHARPLY -- ENERGY SHARES PULL BACK FROM CHART RESISTANCE -- VIX REMAINS WEAK
GLOBAL STOCKS CLIMB ON CONCILIATORY REMARKS... After several tense days, some calm is being restored to global markets. The fact that last night's attack by Iran on allied bases in Iraq resulted in no casualties; plus a more conciliatory-sounding speech by President Trump shortly before noon appear to have reduced geopolilitical tensions in the Mideast. That can be seen by reactions in financial markets. Global stocks are in rally mode. Stock indexes in the U.S. are having a strong day with the Nasdaq in record territory and the S&P 500 not far behind.
STOCK INDEXES NEAR NEW RECORDS... Chart 1 shows the Nasdaq Composite trading in record territory today. Chart 2 shows the S&P 500 close to doing the same. Chart 3 shows the Dow Industrials also nearing record territory. All three remained above their green 20-day moving averages which kept their uptrends intact.
ALL STOCK SECTORS GAIN -- EXCEPT FOR ENERGY... Ten of eleven stock sectors are in the green today led by financials, technology, communications, cyclicals, and industrials. Three of those sectors SPDRs are in record territory. Safe havens like bonds and gold are being sold today. So are energy stocks which are the day's only sector losers on a big drop in the price of oil. Airlines and transportation stocks, however, are getting a boost from weaker oil.
TRANSPORTS GAIN GROUND ON LOWER PRICE FOR OIL -- KSU HITS NEW RECORD... Transportation stocks are also one of the day's biggest gainers. Chart 4 shows the Dow Jones Transportation Average climbing 1% today; it also shows it bouncing off its 50-day average (blue line), and trading at the highest level since late November. Airlines are the biggest part of that gain, and are usually the biggest beneficiaries of lower fuel prices. Stronger railroad stocks are also helping. Chart 5shows Kansas City Southern (KSU) trading in record territory.
CRUDE OIL AND ENERGY SHARES DROP ON REDUCED TENSIONS... Perhaps the biggest sign of a calmer market mood is today's big drop in the price of crude oil. Chart 6 shows the United States Oil Fund (USO) losing -4.5% today. That pushed it back below its previous peak in mid-September (which was itself caused by an attack on Saudi oil facilities). Energy stocks are also being sold off as a result. Chart 7 shows the Energy SPDR (XLE) also falling back below its September high. The XLE is the day's weakest stock sector and the only one in the red.
VOLATILITY (VIX) INDEX REMAINS LOW... Another encouraging market sign is that the VIX Index has remained at a low level throughout the recent increase in Mideast tensions. Chart 8 shows the CBOE Volatility (VIX) Index dropping more than -3% today and falling close to the 13 level. Its recent bounce didn't even come close to threatening its December high. That's usually a sign that stock traders remain in a relatively optimistic mood.
