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S&P 500 drops 60 points on unstable day: Oil stocks fall sharply, Apple leads technology stocks down again

The S&P 500 index (SNPINDEX: ^ SPX) makes his best yo-yo impression in the last week. Today’s close was almost 1.8% lower, giving up almost 60 points after gaining 67 points yesterday, or 2%. This is the fourth session in the last five trading days, when the index, which accounts for about 80% of the total capitalization of US stock markets, has either won or lost more than 1.75%.

This marks almost a week of high volatility, which is mostly negative. Since the record close of 3,580.84 on September 2, the S&P 500 has lost almost 7% of its value. Today’s sell-off, as well as most of the volatility we saw this week, was broad, with most of the 505 stocks in the index ending lower. Several sectors reported any decline in shares during the day and no sector had more profits than losers.

Red and green arrows on blocks.

Image source: Getty Images.

The most affected sectors today were energy and technology. Nine of the 10 least performing stocks today were oil stocks, v EOG resources (NYSE: EOG),, Apache Corp (NASDAQ: APA), and Occidental Petroleum (NYSE: OXY) all fall 8% or more. Technical giants worth a trillion dollars Apple (NASDAQ: AAPL),, Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT) all lost 2.8% or more today. Continuing gliding is reducing all three by more than 10% from its peaks this month.

Historically high unemployment has weighed on stocks

Another week follows with record low levels of unemployment claims. According to the Ministry of Labor’s weekly unemployment report, another 884,000 people filed initial unemployment claims last week. Although this is well below the peak of nearly 7 million weekly applications for the first time set in late March, each week since then would have broken the previous record.

Combine this with a consistently high unemployment rate and a variable labor force participation rate, which is the lowest in more than four decades, and the US economy remains deep in recession.

Diagram of Initial Unemployment Claims in the United States

Details of YCharts’ initial U.S. unemployment insurance claims

A combination of federal government action at the start of the coronavirus pandemic, including financial support for families and businesses, along with the Federal Reserve’s monetary and interest rate stimulus, helped to quickly replenish stocks from the March lows.

Technical stocks, in particular, are at the forefront of the rally, with companies such as Microsoft and Amazon providing critical services and products that consumers and businesses have relied on to operate, and Apple’s high-profit iPhone business and related services has been preserved extremely well.

Over the past week, investors have begun to get sick, sell the names of big technologies and largely cash in on stocks as other sectors continue to struggle under the specter of an ongoing global pandemic that many fear summer is turning into autumn. .

Another hit in oil reduces oil reserves

Crude oil prices fell 2.5% today, with the main US benchmark West Texas Intermediate falling to $ 37.06 a barrel after two weeks of surveys showing a crude oil increase in US warehouses by 2 plus a million barrels in the last week . Total oil stocks, including refined products such as gasoline and diesel, fell 3.4 million barrels last week, but more absorption is expected, which did not happen.

Refinery activity has also declined as the industry moves from the summer peak demand season to the autumn maintenance cycle. Compared to a year ago, the industry continues to cope with a double-digit decline in demand, with production of distillates and gasoline declining by almost 1.5 million barrels per day compared to the previous week.

This is the pursuer of bad news after the pain shot last week, when Saudi Arabia threw its price force on the US oil market, sending commodity prices back to $ 30.

The news hit the energy sector hard: The Energy sector SPDR ETF (NEW: XLE), which invests in all 26 shares of the S&P 500 in the energy sector, fell 3.6% today. Over the last week, the sector has shrunk by almost 8%.

^ SPX graphics

^ SPX data from YCharts

Independent oil producers had the worst day, as these companies were most directly affected by weak demand and falling oil prices. Service companies such as Halliburton (NYSE: HAL) and Schlumberger are next in line as they provide services to manufacturers who are in much less demand in the current environment. The two companies saw their shares fall 5% or more today.

Even refineries like it Petroleum Marathon (NYSE: MPC) and Phillips 66 (NYSE: PSX), which are less exposed to low oil prices but are still affected by weak demand, took it today, as their shares fell by more than 4% in today’s sales.

While refineries and well-capitalized service providers should have little trouble cutting oil, many producers face an economic environment in which they simply cannot survive. Without a recovery in demand, Saudi Arabia will not take its shoe off the throat of any marginal manufacturer there. And that includes a a lot of American shale oil producers.

Fasten your seat belts

The first half of 2020 was one of the most volatile registered periods for shares. And after a relatively calm summer, the past week has brought a sharp return to large fluctuations, both up and down. It also provides a reminder to recharge that while stocks have proven to be incredible long-term wealth builders, they can be brutally painful to own in the short term.

For wealthy investors, they will rely on the cost of living for the next few years, which can be disastrous; for investors who want to accumulate their wealth for their needs in the future, this extreme instability is the thing that can lead to the best long-term profits.

Either way, investors must accept – even embrace – the reality that instability is likely to remain here, especially with so much economic and political uncertainty driving people’s trade decisions in the coming weeks and months.

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