Stock Market News For September 14, 2016

Benchmarks ended in the red on Tuesday mostly dragged down by energy shares. Slump in oil prices weighed on energy shares. Bearish demand growth data had a negative impact on oil prices. Investors also remain on the edge as Fed officials differ on rate hike expectations.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.

The Dow Jones Industrial Average (DJI) declined 1.4% or 258.05 points to close at 18,066.75. The S&P 500 gave up 32.02 points or 1.5% to close at 2,127.02. The tech-laden Nasdaq Composite Index closed at 5,155.25, decreasing 1.1%. On Tuesday, declining issues outnumbered advancing ones on the NYSE by 2,710 to 274.

Volatility is Back

The CBOE Volatility Index (VIX) moved north yesterday as U.S. equities logged a second sharp sell-off in the past three trading sessions. This time, the reason was the slide in crude prices on concerns of waning oil demand. The VIX rose 18% to close at 17.85, implying that investors foresee a further downward swings in the stock market.

For 43 successive trading sessions this summer, stocks barely budged. Such a streak, however, came to an end on Sep 9 when the stock market dropped significantly, only to bounce back on Sep 12. Wall Street’s “fear gauge” index shot up to an average of 16.4 over those two days, which was otherwise hovering at around 12 for a sustained period. The Fed’s ambiguous stance regarding monetary tightening measures resulted in such gyrations (read more: Top 5 Low Beta Stocks to Sail through a Volatile Market ).

Oil Prices Nosedive

Spell of volatility extended yesterday, thanks to slump in oil prices. Slowdown in global oil demand growth weighed on oil prices. According to the International Energy Agency (IEA), demand for global oil sank to 800,000 barrels per day (bpd) in the third quarter of this year, a 1.5 million bpd lower compared to same period last year. IEA also trimmed its 2016 demand growth forecast by 100,000 bpd to 1.3 million bpd.

The IEA said that demand growth has very nearly vanished in developed countries, while it slowed down drastically in Asian powerhouses such as China and India. The IEA added that weak economic growth and heavy flooding in China dented use of oil in the industries. IEA also cited that demand for oil in Europe has gone down.

The Organization of the Petroleum Exporting Countries (OPEC), on the other hand, had said that output from rival producers will be stronger than expected in 2016, which will eventually result in a bigger glut of petroleum. Non-OPEC producers such as U.S., Russia and Norway will produce about 190,000 bpd more than expected this year. On Tuesday, WTI and Brent crude fell 3.1% and 2.6% to $44.90 per barrel and $47.10 a barrel, respectively.

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