Title: Is the Rally in U.S. Oil Prices a Sham? Thursday, Oct. 5 Market Watch
U.S. oil prices have experienced a significant rally in the third quarter, with West Texas Intermediate (WTI) crude reaching a high of over 28%. However, since then, prices have declined by more than 7%, raising concerns about the sustainability of the rally. This article explores the current state of oil prices and examines other market factors influencing trading on Thursday, Oct. 5.
Oil Prices: A Sham Rally?
Early Thursday, Oct. 5, U.S. oil prices dipped below $83 per barrel for West Texas Intermediate crude. This decline follows the third-quarter rally in which WTI crude saw an increase of more than 28%. However, the subsequent drop of 7% has raised doubts about the authenticity of the rally and whether producers are right to hold back on increasing production.
Natural Gas Prices and Decoupling
While oil prices have experienced volatility, natural gas prices have remained relatively stable, hovering around $3 per million British thermal unit. There has been no recognition yet of a decoupling between oil and natural gas prices, although natural gas has seen a slight increase of just over 1% for the week.
Government Bond Yields and Stock Market Performance
The 20-year Treasury yield is near 5.1%, while the 10-year Treasury yield remains above 4.7%. This has contributed to the recent downturn in the stock market, with the Dow, the S&P 500, and the Nasdaq set for a lower open after bouncing back on Wednesday. The 10-year yield, which reached a 16-year high earlier in the week, has been weighing on stocks. However, bond yields experienced a slight decline early Thursday morning before turning positive.
Job Growth and Employment Report
Weaker-than-expected job growth at U.S. companies on Wednesday affected bond yields, as weekly jobless claims rose to 207,000, slightly lower than the expected 210,000. Investors are eagerly awaiting the government’s monthly employment report, which is due to be released on Friday.
Constellation Brands and Molson Coors
Mexican beer company Constellation Brands reported better-than-expected fiscal 2024 second-quarter earnings per share. Excluding its subsidiary Canopy, Constellation Brands saw EPS climb to $3.80, with revenue of $2.84 billion, meeting expectations. The company’s full-year ex-Canopy EPS guidance was raised to $12 to $12.20. Constellation beer rival Molson Coors received a price target bump to $68 from $67 at Barclays, with analysts predicting future growth.
Advanced Micro Devices (AMD)
Baird recently cut the price target for Advanced Micro Devices (AMD) to $125 per share from $170. However, the analysts maintained their outperform (buy) rating, stating that AMD’s MI300 chip for artificial intelligence lacks the software ecosystem that its competitor Nvidia has.
Costco’s September Sales and United Auto Workers’ Strike
Wholesale retailer Costco reported sales in September that were in line with estimates, indicating some improvement. Additionally, the ongoing United Auto Workers’ strike against General Motors, Chrysler-parent Stellantis, and Ford has had a negative effect on suppliers, with nearly 30% of original equipment suppliers surveyed stating that they have laid off workers due to the strike. Over 60% of suppliers plan further layoffs by mid-October.
The recent decline in U.S. oil prices has raised questions about the sustainability of the previous rally. Other market factors, such as natural gas prices, government bond yields, and job growth, have also influenced stock market performance. Meanwhile, companies like Constellation Brands and Molson Coors have reported positive earnings, and Advanced Micro Devices is seen as having potential in the artificial intelligence sector. As the market continues to evolve, investors are advised to stay vigilant and monitor these key indicators for potential investment opportunities.