$Stock*Shop*Charts*News*Option$

[EZ2]

The only place left to invest if 'Oilmageddon ' hits this market

MARKETWATCH 8:37 AM ET 2/5/2016

Critical information ahead of the U.S. market's open

Investors are about to embark on a great adventure -- a week without Chinese interference. Millions are hitting the road for the Lunar New Year holidays, and local markets are shut. To keep cash flowing for the holidays, the People's Bank of China has been pouring money into the financial system all week.

One thing that China break should provide is plenty of time for Wall Street to go into hyper-navel-gazing mode over the U.S. economy -- and it's been doing a lot of that, recently. One giant update in the forms of jobs data comes later today, to polish off the week. (Just in, see below)

Meanwhile, the ripples we've been seeing across several asset classes -- gold bugs are smelling life and the dollar has tumbled, while the S&P 500 is set to lose over 1% -- has brought out some bears. Credit Suisse pushed out a note this morning entitled "Dangerous markets."

"The opening of new frontiers in a bear market should always be a matter of concern, given the increase in the scale of potential wealth losses," says the bank's fixed-income strategy and economics team.

They're particularly alarmed by sharp losses in previous "safe havens" such as financials. The analysts say three things will keep amping up the stress in markets: a U.S. recession risk, an increasing drive toward negative interest rates, and fears that policy makers can't do much about a global growth slowdown.

Our call of the day looks to see this bearish view and raise it. Full marks to Citigroup for coming up with a terrifying new noun -- "Oilmageddon."

Our chart of the day takes a look at the dollar, which could be in for a big day.

Key market gauges

Dow and S&P futures are tilting lower as that jobs data has come in under expectations. Asia (http:// www.marketwatch.com/story/oil-jumpstarts-asian-markets-to-early-gains-2016-02-03) (http://www.marketwatch.com/story/ asian-stocks-mixed-in-run-up-to-lunar-new-year-holiday-2016-02-04) stocks finished mixed -- the Shanghai Composite slipped 0.6%, while the Nikkei 225 sank 1.3%. European stocks (http://www.marketwatch.com/story/european-stocks- becalmed-as-investors-await-us-jobs-report-2016-02-05) (http://www.marketwatch.com/story/european-stocks-face-a-second- day-in-the-red-2016-02-02) are slightly higher, while gold is up.

The dollar (http://www.marketwatch.com/story/dollar-could-hit-115-if-jobs-data-disappoints-analyst-2016-02-05) has turned higher against the euro and the yen. Oil prices (http://www.marketwatch.com/story/oil-continues-march-higher-but- analysts-see-move-as-short-lived-2016-02-04) are up.

Here's Saudi Arabia's foreign minister saying in an interview that oil prices won't determine foreign policy.

(https://twitter.com/business/status/695504409636184064)

The economy

U.S. jobs gained 151,000 in January, shy of the expected 180,000 (http://www.marketwatch.com/story/us-creates-151000- jobs-in-january-unemployment-49-2016-02-05), and the jobless rate fell to 4.9%, the first time it has dropped under 5% in eight years. Average hourly wages jumped 0.5%. The traded deficit climbed 2.7% to $43.4 billion in December.

Consumer credit hits at 3 p.m.

The call

Hat tip to iBankCoin's The Fly (http://ibankcoin.com/flyblog/2016/02/04/citi-fear-the-oilmaggedeon-the-death-spiral- is-here/) for drawing attention to this call from Citi's European portfolio strategist Jonathan Stubbs, a noted bear. Here goes:

"We appear trapped in a circular reference death spiral with shorter USD, weaker oil/commodity prices, weaker global trade/petrodollar liquidity and weaker EM (and global) GDP growth. If this continues, then the prospects for global GDP growth, corporate profits and share prices are not good..." says Stubbs in a note, co-written by Ayush Tambi and Nikhil Jadhav.

Another year of big moves up for the dollar and big moves down for oil and commodity prices "would likely continue to drive this "negative feedback loop," they warn. That scenario would make it difficult for policy makers -- whether in developed and developing countries -- to fight off deflation and threats to economic health.

"Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon," says Stubbs.

He notes the Citi house view is not that bleak. Their call is for the dollar to remain strong, but not too strong this year -- a 4% appreciation in the trade-weighted dollar -- and oil prices toward $50 by year-end.

But if this Oilmageddon scenario opens up, a "significant and synchronized" global recession could be the result, leaving "nowhere to hide in equities." So, the worst-case scenario: Cash wins, says Stubbs.

It's worth noting here that Morgan Stanley completely threw in the towel on higher oil prices for 2016 (http:// www.marketwatch.com/story/morgan-stanley-gives-up-on-higher-oil-prices-in-2016-2016-02-04) earlier this week.

The chart of the day

If jobs data comes below expectations, the greenback is going to take a hard hit, analysts say. And it's already shaping up to be the worst week for the dollar index in several years.

Charlie Bilello, director of research at Pension Partners, tweeted out this chart showing how bad it's been in recent days:

(https://twitter.com/MktOutperform/status/695304307822841856)

But then others say the recession risk still isn't there. So go dollar-bearish at your own risk.

(https://twitter.com/WorthWray/status/695383130748821505)

Earnings

LinkedIn (LNKD) triggered a stampede for the exits by shareholders on Thursday after it gave a disappointing outlook. Trying to reassure with new jargon about hunters and farmers didn't help much (http://www.marketwatch.com/story/hunters- farmers-linkedin-earnings-confuse-investors-into-a-panic-2016-02-04). Shares are down 30% in premarket Friday.

Tyson Foods (TSN) earnings exceeded expectations, and offered mixed revised guidance. Shares are up 4.4%. Estée Lauder (EL) beat profit views but cut its outlook. Shares aren't moving.

Also check out:Ugly earnings may mean a scary 20% S&P 500 plunge (http://www.marketwatch.com/story/ugly-earnings-may- mean-a-scary-20-sp-500-plunge-2016-02-03)

The buzz

Symantec said it's getting a fresh cash injection of $500 million from Silver Lake. And that's as the security technology company just keeps shrinking (http://www.marketwatch.com/story/despite-billions-in-fresh-cash-symantec-will- cut-costs-and-go-into-debt-2016-02-04).

(http://www.marketwatch.com/story/despite-billions-in-fresh-cash-symantec-will-cut-costs-and-go-into-debt-2016-02- 04)Apple (AAPL) CEO Tim Cook says he's looking at offering more services on Android phones, just like it did with Apple Music, according to 9to5Mac (http://9to5mac.com/2016/02/04/tim-cook-india-iphone-apple-watch-android/). (http:// 9to5mac.com/2016/02/04/tim-cook-india-iphone-apple-watch-android/) At a recent town hall, he said Apple is getting ready to give new time-off benefits for employees -- such as four weeks of paid leave to care for an ill family member, and extending maternity and paternity benefits to countries outside the U.S.

Read:$2,000 to go traveling, and other best perks for employees (http://www.marketwatch.com/story/the-10-best-perks- that-you-wish-your-company-had-2016-02-04)

The quote

House Majority Whip Steve Scalise of Louisiana said President Barack Obama's$10-a-barrel oil tax to pay for clean transportation (http://www.marketwatch.com/story/obama-proposing-10-a-barrel-oil-tax-to-pay-for-clean-transportation- 2016-02-04) could be his "worst idea yet."

(https://twitter.com/SteveScalise/status/695363487069917186)

Naturally, the oil lobby didn't like it either, (http://www.huffingtonpost.com/entry/lobbyists-obama-oil-tax_us_ 56b3c5d4e4b01d80b245a9c0?) (http://www.huffingtonpost.com/entry/lobbyists-obama-oil-tax_us_56b3c5d4e4b01d80b245a9c0?) considering oil companies would be paying for it.

The stat

6 million -- That's how many Chinese tourists will be leaving the country to mark the Lunar New Year holidays next week. It's a 15% gain on last year (http://www.cnbc.com/2016/02/04/coming-near-you-six-million-chinese-tourists-next- week.html).

This cool graphic lays out how they'll get there:

(https://twitter.com/PaulsonInst/status/695393839444439040)

Random reads

The Democratic debate last night featured a ton of carping about Wall Street money (http://blogs.marketwatch.com/ capitolreport/2016/02/04/live-blog-of-the-hillary-clinton-bernie-sanders-debate-in-new-hampshire/).

A museum is livid after a priceless antique guitar got smashed during "The Hateful Eight" filming (https://reverb.com/ blog/cf-martin-responds-to-the-destruction-of-145-year-old-guitar-on-hateful-eight-set).

BMX, X Games star Dave Mirra dead at 41 in apparent suicide (http://www.theguardian.com/sport/2016/feb/04/bmx-star- dave-mirra-dead-of-apparent-self-inflicted-gunshot)

(https://twitter.com/hartluck/status/695419752685023232)

Wheelchair-bound passenger is suspected of being a bomber after being sucked out of that plane over Somali (http:// nypost.com/2016/02/04/man-sucked-out-of-plane-might-have-been-suicide-bomber/)

Wanted: Man wearing Batman costume who robbed two dollar stores (http://www.nydailynews.com/news/national/florida- cops-batman-robber-article-1.2520190?utm_content=buffer308a0&utm_medium=social&utm_source=twitter.com&utm_campaign= NYDailyNewsTw).

Another musical great gone. Maurice White, founder of Earth, Wind & Fire, dead at 74

(https://twitter.com/EarthWindFire/status/695380702183829504)

When Hoverboards and vodka bottles (http://www.nydailynews.com/news/world/man-filmed-falling-hoverboard-buying-vodka- article-1.2519858?utm_content=buffere0e41&utm_medium=social&utm_source=twitter.com&utm_campaign=NYDailyNewsTw) (http:// www.nydailynews.com/news/world/man-filmed-falling-hoverboard-buying-vodka-article-1.2519858?utm_content=buffere0e41&utm_ medium=social&utm_source=twitter.com&utm_campaign=NYDailyNewsTw) don't mix.

Need to Know starts early and is updated until the opening bell, butto get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

-Barbara Kollmeyer; 415-439-6400; [e-mail]


(END) Dow Jones Newswires
02-05-160837ET
Copyright (c) 2016 Dow Jones & Company, Inc.