U.S. stocks across the board are in sell-off mode with the Dow down over 450 points -2.79, the S&P 500 losing -53 points -2.80 percent, and the Nasdaq erasing -162 points -3.45 percent.
The global selloff began on Friday in China when Chinese stocks retreated, led by the Shanghai Composite Index, which shed another -3.55 percent and entered bearing territory with investors taking risk off the table following weak economic data over the past 2 weeks in January along with heightened volatility due to China’s central bank devaluing the yuan this month.
Although crude oil prices stabilized a little yesterday and rose over 2 percent, today it resumed its downward pathway and dropped below $30 a barrel, marking a decline over 5 percent at the end of week.
Crude prices are now down over 10 percent this week amid rising concerns about Iran bringing an estimated 500, 000 barrels per day online into global markets during a period of excessive oil supplies and weakening demand, led by weaker growth in China, the world’s second largest economy that imports large amounts of oil.
The decline in global crude is exacerbated by a decision to make no production cuts from OPEC, buttressed by the world’s largest OPEC oil exporter, Saudi Arabia, which has shown little appetite of ceding market share, preferring instead to see the North American shale industry and non-Opec member nations such as Russia feel the pain of lower crude oil prices.
Falling crude oil prices combined with a strong U.S. dollar relative to other currencies has accelerated the drop in the energy sector and global commodities which are in a free fall.
The U.S. stock market will be closed on Monday since it’s a holiday.
On Tuesday January 19th China’s National Bureau of Statistics releases Chinese GDP for the 4th quarter along with full year 2015 GDP.
During the 3rd quarter of 2015 China’s GDP dropped below 7 percent to 6.9 percent.
China’s GDP hasn’t fallen below 7 percent since 1990 when it reached 3.9 percent in 1990.
In 2014 China’s GDP was 7.3 percent.
The annual growth rate in China averaged 10.88 percent from 1989 until 2015.
Today investors were discouraged by a wave of weak U.S. economic data from December that varied from retail figures from the Commerce Department showing a drop of .01 percent, industrial production declining -0.4 percent, PPI sliding -0.2, and Empire Manufacturing falling -19.4 percent.
Although the U.S. labor and housing markets have shown strength alongside relatively decent consumer spending levels across the U.S. economy, manufacturing in the U.S. is in a period of steady decline.
U.S. corporations with global exposure to a strong dollar are faced with the reality of entering a new cycle of tightening monetary policy in 2016 that will likely impact their balance sheets as the dollar is under fundamental pressure to strengthen, coupled with other central banks across the globe maintaining loose monetary policies. In other words, diverging monetary policies on a global scale.
Joe Duran from United Capital Financial told CNBC today that he is telling investors a recession is more likely to occur.
“What we are telling them is that we are much higher likelihood of going into a recession. Two thirds of our recessions in our history have come when the Fed is increasing rates” Duran said.
“What we tell everyone is we typically have a 15 percent decline every 300 days. We have not had one for well over 1500 days” Duran added later.