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Wall Street closes slightly lower, oil prices surge after attack in Saudi Arabia
16-Sep-19 16:20 ET
Dow -142.70 at 27076.80, Nasdaq -23.17 at 8153.58, S&P -9.43 at 2997.96

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 declined 0.3% on Monday after an attack on Saudi Arabia's oil refineries sent oil prices up nearly 15% and escalated geopolitical tensions. The Dow Jones Industrial Average lost 0.5%, and the Nasdaq Composite lost 0.3%. The Russell 2000 increased 0.4%, helped by big gains in the oil-sensitive stocks.

The attack knocked about 5.7 million barrels per day out of production, leading to the biggest one-day gain in WTI crude ($62.88/bbl, +$8.00, +14.6%) since 2008. Saudi Arabia expected to restore about a third of lost production on Monday, while normal production might take "weeks not days," according to sources from Reuters.

Some angst revolved around a possible retaliatory attack from the U.S. and Saudi Arabia on Iran. It wasn't confirmed if Iran was the aggressor, but the U.S. was quick to implicate Tehran while a preliminary investigation found the weapons used in the strike originated from Iran, according to al-Riyadh.

Unsurprisingly, today's winning groups included the S&P 500 energy sector (+3.3%) and iShares Dow Jones US Aerospace & Defense ETF (ITA 229.87, +2.35, +1.0%). The S&P 500 real estate (+1.0%) and utilities (+0.1%) sectors also finished higher, helping ease the losses from the materials (-1.6%), consumer discretionary (-1.3%), and consumer staples (-1.0%) sectors.

American Airlines (AAL 27.77, -2.18, -7.3%) led the airline stocks lower amid concerns about a rise in fuel costs pressuring margins. Similarly, Amazon (AMZN 1807.84, -31.50, -1.7%) and many stocks within the SPDR S&P Retail ETF (XRT 43.07, -0.50, -1.2%) underperformed amid speculation that the higher oil prices would translate into higher gas prices that would hurt discretionary spending.

The attack might have been a good excuse to sell the market, which entered today on a three-week rally. The broader market held up relatively well, though, with advancing issues outpacing declining issues at both the Nasdaq and NYSE. This might have been due to an understanding that (1) the U.S. is less reliant on imported oil than it used to be and (2) the U.S. economy has been resilient in the face of slowing global growth.

Defensive positioning was taken, though, with traditional safe-haven assets like U.S. Treasuries and gold finishing higher. The 2-yr yield declined three basis points to 1.76%, and the 10-yr yield declined six basis points to 1.84%. The U.S. Dollar Index advanced 0.4% to 98.61. Gold futures increased 0.8%, or $12.00, to $1511.50/ozt.

Separately, General Motors (GM 37.21, -1.65, -4.3%) was a story stock after close to 50,000 UAW workers at GM went on strike.

Economic data was sparse on Monday. The Empire State Manufacturing Survey for September declined to 2.0 (Briefing.com consensus 5.5) from the prior month's reading of 4.8.

Looking ahead, investors will receive Industrial Production and Capacity Utilization for August, the NAHB Housing Market Index for September, and Net Long-Term TIC Flows for July on Tuesday.

Nasdaq Composite +22.9% YTD
S&P 500 +19.6% YTD
Russell 2000 +17.5% YTD
Dow Jones Industrial Average +16.1% YTD